~^ 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


r 


Modern  Business 


A   SERIES    OF    TEXTS    PREPARED    AS 

PART   OF  THE   MODERN  BUSINESS 

COURSE  AND  SERVICE  OF  THE 

ALEXANDER  HAMILTON 

INSTITUTE 


ALEXANDER  HAMILTON  INSTITUTE 
NEW  YORK 


Modern  Business 

Editor-iri-Chief 

JOSEPH  FRENCH  JOHNSON 

Dean,  New  York  University  School  of  Commerce,  Accounts  and  Finance 

Associate  Editors: 

PETER  P.  WAHLSTAD,  ROLAND  P.  FALKNER 


Titles  Authors 

Business  and  the  Man Joseph  French  Johnson 

Eco«OM,cs  OK  B„s,«.:ss iFSYXvey""""" 

Organization  and  Control Charles W.Gerstenberg 

Factory  and  Office  Administration      .      .  Lee  Galloway 

Marketing  Methods       • Ralph  Starr  Butler 

Advertising  Principles Herbert  F.  De  Bower 

Salesmanship  and  Sales  Management     .      .  John  G.  Jones 

Credit  and  the  Credit  Man Peter  P.  Wahlstad 

Accounting  Principles Thomas  W.  Mitchell 

Cost  Finding Dexter  S.  Kimball 

Corporation  Finance     .......  William  H.  Walker 

Business  Correspondence Harrison  McJohnston 

Advertising  Campaigns Mac  Martin 

Inland  Traffic Simon  J.  McLean 

Foreign  Trade  and  Shipping Erich  W.  Zimmermann 

Banking  Principles  and  Practice      .      .      .  E.L.  Stewart  Patterson 

Domestic  AND  Foreign  Exchange        .      .      .  E.L.  Stewart  Patterson 

Insurance  AND  Real  Estate ]  wXr^LLn:;'" 

Merchandising John  B.  Swinney 

The  Exchanges  and  Speculation  ....  Albert  W.  Atwood 

Accounting  Practice  and  Auditing  .      .      .  John  T.  Madden 

Financial  and  Business  Statements  .      .      .  Leo  Greendlinger 

Investment Edward  D.  Jones 

Commercial  Law Walter  S.  Johnson 


FOREIGN  TRADE  AND 
SHIPPING 


BY 

ERICH  W.  ZIMMERMANN,  Ph.D. 

Instructor  in  Economics,  Neiv  York  University 


WITH  THE  COLLABORATION  OF 

W.  C.   CLARK,  Ph.D. 

Assistant  Professor  of  Political  and  Economic 
Science,  Queens  University 


MODERN  BUSINESS 

VOLUME    15 


ALEXANDER  HAMILTON  INSTITUTE 
NEW  YORK 


COPYRIGHT,  1918,  BY 

ALEXANDER  HAMILTON  INSTITUTE 


COPYRIGHT  IN  GREAT  BRITAIN,  1918,  BY 

ALEXANDER  HAMILTON  INSTITUTE 


The  title  and  contents  of  this  volume, 
as  well  as  the  business  growing  out  of 
it.  are  further  protected  by  laws  re- 
lating to  trade  marks  and  unfair  trade. 

All  rights  reserved,  including  transla- 
tion into  Scandinavian. 


Registered  trade  mark,  Reg.  U.  S.  Pat.  Off., 
Marca  Registrada,  M.  de  F. 

Made  in  U.  S.  A. 


PREFACE 

This  book  deals  with  a  subject  which,  to  an  excep- 
tional degree,  is  affected  by  the  European  War.  It 
discusses  questions  which,  at  present,  are  foremost  in 
the  minds  of  our  statesmen  and  lawmakers,  and  which 
are  the  center  of  public  discussion.  This  rendered  the 
task  unusually  interesting,  but  at  the  same  time  deli- 
cate. A  text  book  must  contain  the  latest  available 
information  and  be  up-to-date  in  its  interpretation  of 
conditions  and  principles,  and  yet  not  be  too  journal- 
istic. This  imposes  the  duty  of  sifting  the  lasting 
good  from  the  chaff  of  partisan  discussion  in  the  mass 
of  contemporary  writing  on  this  subject. 

The  mass  of  literature  is  so  extensive  that  I  find  it 
impracticable  to  mention  specific  works  which  have 
been  of  assistance  in  the  preparation  of  this  volume 
without  unduly  lengthening  this  preface. 

In  particular,  I  wish  to  express  my  appreciation 
of  the  encouragement,  advice,  and  assistance  of  my 
friend,  Professor  Edwin  J.  Clapp,  in  planning  and 
writing  this  book. 

Erich  W.  Zimmermann. 
University  Heights, 

New  York, 


5 


TABLE  OF  CONTENTS 

PART  I— FOREIGN  TRADE 
CHAPTER  I 

A  NEW  ERA  IN  AMERICAN  BUSINESS 

1.  New    Tendencies    in    the    Foreign    Policy   of    the 

United  States 3 

2.  Recent  Economic  Changes 4« 

3.  Energetic  Pursuit  of  Foreign  Trade  an  Economic 

Necessity 5 

4.  Favorable  Trade  Balance 7 

5.  Influence  of  the  European  War  upon  Our  Exports  7 

6.  What  Exports  Should  Be  Stimulated?  .       ...  8 

7.  Imperative  Need  for  a  National  Foreign  Trade 

Policy 11 

8.  Foreign  Trade  Development  Profitable  to  Our  In- 

dustries        12 

9.  Foreign    Trade    Expansion    a   Road    to    National 

Power 13 

10.  Present  Time  Affords  Ideal  Opportunity  for  the 

Expansion  of  Trade 14> 

11.  Factors  That  Have  Already  Aided  Foreign  Trade 

Expansion 16 

12.  What  Must  Still  Be  Done 17 

CHAPTER  II 
A  TRANSITIONAL  STAGE  IN  CANADIAN  TRADE 

1.  Former  Isolation 20 

2.  Canada's  Commercial  Policy 21 

vii 


viii  FOREIGN  TRADE 

SECTION  PAGE 

3.  General  Character  of  Canada's  Foreign  Trade      .  22 

4.  Canada  Formerly  in  First  Stage 23 

5.  A  Sudden  Reversal  in  the  Trade  Balance  ...  24 

6.  Will  the  Change  Prove  Permanent.?       ....  25 

7.  Necessity  for  Increased  Production       ....  26 

8.  What  Lines  of  Production  Should  Be  Stimulated?  27 

9.  Manufacturing  in  Canada 30 

10.  Her  Present  Opportunity    .       .       .       .       .       .       .31 

11.  Efforts  That  Have  Been  Made  to  Promote  Trade  32 

CHAPTER  III 

ELEMENTS  OF  FOREIGN  TRADE 

1.  Nature  of  World  Trade 36 

2.  Growth  of  World  Trade 37 

3.  Fundamental  Causes  of  International  Trade    .       .  37 
4?.  Differences  in  the  Stage  of  Economic  Development  38 

5.  Differences  in  Natural  Resources 39 

6.  Effect   of   Natural   Resources    on    the    Trend   of 

World  Trade 40 

7.  International  Coal  Trade 41 

8.  Extent  and  Significance  of  British  Export  Coal 

Trade 42 

9.  German  Foreign  Trade  in  Coal 43 

10.  World-Wide  Distribution  of  British  Coal  ...  43 

11.  Future  of  the  Coal  Trade 44 

12.  Iron  Ore 44 

13.  International  Grain  Trade  .       .       .       .      .       .      .45 

14.  The  Wheat  Trade 47 

15.  Intensive  and  Extensive  Wheat  Production      .      .  49 

16.  Seasonal  Character  of  the  Wheat  Trade    ...  50 

17.  Corn  Crop 51 

18.  Other  Cereals  and  Starch  Foods 51 

19.  Cotton  Trade 53 

20.  Tobacco  Trade 55 


CONTENTS  ix 

SECTIOX  PAGE 

21.  International   Sugar   Trade 56 

22.  Brussels  Conventions 57 

23.  Coffee 58 

24.  Rubber 60 


CHAPTER  IV 
TRADE  INFORMATION  AND   PROMOTION 

1.  Intimate    Relation    of    Government    and    Foreign 

Trade 62 

2.  Revenues 62 

3.  Shipping 63 

4.  Trade  Information 64 

5.  Difficulty    of   Obtaining   Americans    for   Positions 

Abroad 65 

6.  Training   Needed 66 

7.  Training  Available   .    ■ 67 

8.  Canada's   Efforts 68 

9.  General  Work  of  the  Philadelphia  Commercial  Mu- 

seum      69 

10.  Private  Organs  of  Information 70 

11.  Important  Service  of  Express  Companies  ...  70 

12.  Banks  as  Sources  of  Promotion 71 

13.  Foreign    Trade    Department    of  the   Philadelphia 

Commercial  Museum 73 

14.  The  National  Foreign  Trade  Council  ....  75 

15.  Trade  Papers 75 

16.  Branch  Banks '7Q 

17.  Dollar  Exchange 78 

18.  Foreign  Investments "^9 

19.  Foreign  Branches  of  Canadian  Banks  ....  80 

20.  Canada's  Foreign  Investments 81 

21.  Railroads  and  Foreign  Trade 82 


X  FOREIGN  TRADE 

CHAPTER  V 

METHODS  OF  EXPORTING 

SECTION  PAGE 

1.  Variety  of  Foreign-Trade  Methods      ....  84 

2.  Direct  and  Indirect  Methods 85 

3.  Export  Department 87 

4.  Marketing  Policies 87 

5.  Branch  Houses 88 

6.  Salesmen  Abroad 88 

7.  Local  Commission  Agents 89 

8.  Forwarding  Agents 91 

9.  Freight  Brokers 92 

10.  Parcel  Post 92 

11.  Selling  by  Mail 94 

12.  Indirect  Exporting 94 

13.  Position  of  the  Middleman 95 

14.  Early  Merchants  Replaced  by  Agents  ....  96 

15.  Position  of  Export  Commission  House      ...  97 

16.  Definition  of  a  Commission  Plouse 98 

17.  Commission  House  as  Merchant 98 

18.  Advantages  Offered  by  the  Commission  House  to 

the  Foreign  Buyer 99 

19.  Advantages  Offered  by  the  Commission  House  to 

Exporting  Manufacturer 101 

20.  Efforts  of  the  Exporter  to  Support  the  Commis- 

sion House 102 

21.  Relation  of  the  Commission  House  to  the  Foreign 

Agents 102 

22.  Recent  Inroads   in  the  Field  of  the   Commission 

House 103 

23.  New  Services  of  the  Export  Commission  House      .  104 

24.  Limitation  of  the  Commission  House  Service   .       .  104 

25.  Merchant    System ;  Loaning   Capital   to    Foreign 

Importers 105 

26.  Manufacturer's  Agent 107 


CONTENTS  xi' 

SECTION  PAGE 

27.  Canadian  Practice 108 

28.  Commission  Houses  in  Canadian  Trade      .       .       .  109 

CHAPTER  VI 

COOPERATION  IN  FOREIGN  TRADE 

1.  Need  of  Cooperation 110 

2.  European  Methods Ill 

3.  Isolation  of  the  American  Exporter     .       .       .       .113 

4.  American  Copper  Abroad 114 

5.  Prussian  Government  and  German  Potash      .       .114 

6.  Smaller  Manufacturer  Handicapped     ....  116 

7.  Advantages   of  Cooperation 118 

8.  Various  Forms  of  Cooperation 119 

9.  German  Cartels  and  Syndicates 119 

10.  Strong  Export  Policies 121 

11.  Greater  Necessity  for  Cooperation  After  the  Eu- 

ropean VV^ar 122 

12.  Recent  Attempts  to  Bring  About  Cooperation      .  122 

13.  International   Manufacturers'    Sales    Company   of 

America 123 

14.  Plan  of  Mr.  W^.  S.  Kies 125 

15.  Legal  Status  of  Cooperative  Organizations      .       .  127 

16.  Permissive  Legislation  Needed 128 

17.  Objection  to  Foreign  Trade  Exemption    .       .       .128 

18.  Clayton  Anti-Trust  Law  and  Foreign  Trade  .       .  129 

19.  Federal  Trade  Commission 130 

20.  V\^ebb  Bill 131 

21.  The  Export  Association  of  Canada      ....  132 

CHAPTER  VII 

THE  TECHNIC  OF  EXPORT  TRADE 

1.  Soliciting   Indents 135 

2.  Sending   Samples 135 


xii  FOREIGN  TRADE 

SECTION-  PAGE 

3.  Samples  Issued  Represent  Goods    .      .      .      .      .  136 

4.  Price   Policy 137 

5.  Details  of  Quotations 138 

6.  The  Indent 149 

7.  Standardizing  the  Order 150 

8.  Packing  for  Export 152 

9.  Weights   and  Measurements 154 

10.  Marking  the  Goods 154 

11.  Invoicing 155 

12.  Sundry  Documents 157 

CHAPTER  VIII 

THE  TECHNIC  OF  EXPORT  TRADE    (CONTINUED) 

1.  Inland  Transportation 159 

2.  ■  "Straight"  and  "Order"  Bills  of  Lading     .       .       .161 

3.  "Thru"  Bills  of  Lading 161 

4.  Bills  of  Lading  in  Canada 162 

5.  The  "London  Clause"  Charge 162 

6.  Ocean  Rates 163 

7.  Routine  of  Making  the  Shipment 163 

8.  Documents 164 

9.  Steamship  Bill  of  Lading 169 

10.  "Foul"  and  "Clean"  Bills  of  Lading    .       .       .       .171 

11.  Consular   Services 172 

12.  Certificates  of  Origin 176 

13.  Other  Certificates :  Special  Regulations      .       .       .  176 

CHAPTER  IX 

THE  WAR'S  EFFECT  ON  AMERICA'S  FOREIGN  TRADE 

1.  Two  Stages  of  the  War 178 

2.  America's  Foreign  Trade  in  Recent  Years      .      .  179 

3.  Trade  with  Europe 180 

4.  Trade  with  Other  Continents 183 


CONTENTS  xili 

SECTIOK  PAGE 

5.  Nature  of  American  Trade 184; 

6.  Imports    . 186 

7.  Quantities  and  Prices 190 

8.  America  Enters  the  War 192 

9.  Government  Control  of  Trade 193 

10.     How  the  Exporter  is  Affected 194 

PART  II— SHIPPING 

CHAPTER  I 

ELEMENTS  OF  OCEAN  TRANSPORTATION 

1.  Freedom  of  the  Seas  an  International  Law     .       .  199 

2.  British  Statement  at  the  Hague  Conference    .       .  200 
8.      Interest  of  the  United  States 202 

4.  Freedom  of  the  Seas  and  Economic  Law    .       .       .  202 

5.  Reasons  for  Difference  Between  Land  and  Water 

Transportation 203 

6.  Guarantees  of  the  Freedom  of  the  Sea  ....  204 

7.  Tonnage  Definitions  and  Tonnage  Ratios  .       .       .  205 

8.  First  Proposals  of  a  Uniform  Method  of  Measur- 

ing Vessels 206 

9.  Moorsom   System 207 

10.  Freight  Charges  and  Kinds  of  Tons     .       .       .       .209 

11.  Computing  Net  Tonnage  from  Gross  Tonnage      .  210 

12.  Cargo  Space  and  Dead-weight  Capacity     .       .       .  211 

13.  Ship-Inspection  and  Registration 212 

1-1.     Regulations  Governing  the  Manifest    ....  215 

CHAPTER  II 

OCEAN  CARRIERS 

1.  Ship  Development 217 

2.  Causes  of  Growth 218 

3.  Steam  and  Sail  Tonnage 219 

4.  Oil  Burning  Vessels 221 


xiv  FOREIGN  TRADE 

SECTION  PAGE 

5.  Future  of  the  Sailing  Ship 222 

6.  Replacement  of  Wooden  by  Iron  and  Steel  Vessels  223 

7.  Classification    of    Merchant   Fleet    in    Regard    to 

Service 223 

8.  Tramp  Distinguished  from.  Liner 224 

9.  Construction  of  Tramp  Steamer 226 

10.  Economics  of  the  Tramp 227 

11.  Occupation  of  the  Tramp 227 

12.  Legal  Status  of  the  Tramp 228 

13.  Operation  and  Management  of  Liners  ....  229 


CHAPTER  III 
PUBLIC  AND  PRIVATE  CARRIERS 

1.  Epoch  of  the  Merchant  Carrier 232 

2.  Coming  of  the  Public  Carrier 233 

3.  Renaissance  of  the  Private  Carrier      ....  23-4 

4.  Examples  of  Private  Carriers 235 

5.  United  Fruit  Company  and  the  Banana  Trade     .  236 

6.  Coal  and  Petroleum  Carried  by  Private  Lines  .       .  237 

7.  Merchants*  Private  Lines 238 

8.  Pacific  Ocean  and  the  Railroad-Steamship  Line     .  239 

9.  Foreign  Railroad-Steamship  Lines       ....  240 

CHAPTER  IV 

OCEAN  FREIGHT  SERVICE 

1.  Growth  of  Sea-borne  Trade 242 

2.  Evolution  of  the  Freight  Sei'vice 244 

3.  Berth  Traffic 245 

4.  Line  Traffic 246 

5.  Modern  Charter  Market 246 

6.  Operation  of  Charter  Business 247 

7.  Port  of  Destination 249 

8.  Ship  Brokers 251 


CONTENTS  XV 

SECTION  PAGE 

9.      Charter  Parties 251 

10.  Operation  of  Line  Traffic 252 

11.  Seaboard  Brokers 253 

12.  Cost  of  Employing  Forwarding  Houses      .       .       .  253 

13.  Steamship  Agents 254* 

14.  Transshipment 254 

CHAPTER  V 
OCEAN  FREIGHT  RATES 

1.  Charter  and  Liner  Rates 257 

2.  Causes  of  Low,  Charges  of  Water  Transportation  258 

3.  Rate  Fluctuation 260 

4.  Conditions  Affecting  Rates 262 

5.  Rate  Basis  not  Cost  of  Operation 264 

6.  Knot  Time 265 

7.  Competition 266 

8.  Load  Factors 267 

9.  British  Coal  Exports  and  World  Charter  Rate      .  268 

10.  United  States  Coal  Exports 269 

11.  Triangular  Voyages 270 

12.  Mixed  Cargo  as  a  Rate-Making  Factor     .       .       .  271 

13.  Rate  Quotations 272 

14.  Effect  of  Tramps  on  Line  Rates 273 

15.  Rates  and  the  European  War 274 

CHAPTER  VI 

STEAMSHIP  AGREEMENTS 

1.  Regulated  Versus  Wild  Competition    ....  277 

2.  Government  Livestigation .  277 

3.  Tramp  Vessel  Combinations 278 

4.  Examples  of  Charter  Vessel  Combinations      .       .  279 

5.  Liner  Cooperation 280 

6.  Agreements  in  L^nited  States  Trade     ....  281 

7.  Important  Ship  Combinations  in  United  States     .  283 


xvl  FOREIGN  TRADE 

SECTION  PAGE 

8.  South  American  Trade 283 

9.  Conferences  and  Pools 284* 

10.  Administration   of  Pools 285 

11.  Immigrant  Traffic  Pools 286 

12.  Conference  Advantages  to  Shippers      ....  286 

13.  Rate  Charges  and  Rate  Wars 287 

14.  General  Advantages 288 

15.  Shippers'  Objections  to  Combinations  ....  290 

16.  New  Lines 291 

17.  Combinations  Among  Steamship  Lines  in  the  Ca- 

nadian Trade 292 

18.  Evidence  Before  Commission  of  Investigation  ,       .  293 

CHAPTER  VII 

PORTS   AND   TERMINALS 

1.  Nature  and  Function  of  a  Port 294* 

2.  Value  of  Seaport  to  Community  and  "Hinterland"  295 

3.  Four  Classes  of  Ports 295 

4.  New  York's  Predominance 297 

5.  New  York's  "Hinterland" 299 

6.  Railroad-Steamship  Lines 300 

7.  Charter  Traffic  in  Atlantic  Seaports    ....  300 

8.  "Entrepot"  or  Transshipment  Trade  ....  302 

9.  Lack  of  Transshipment  Trade  at  New  York  .       .  303 

10.  British  Raw  Materials 304 

11.  Free  Ports 307 

12.  Rail  and  Water  Coordination  of  Carriers  .       .       .  309 

13.  American  International  Terminal  Corporation      .  309 

14.  Canada's  Leading  Summer  Port:    Montreal    .       .  310 

15.  Montreal's  Hinterland 311 

16.  Canadian  Pacific  and  Grand  Trunk  Railways  .       .  312 

17.  Coordination  of  Rail  and  Water  Services  at  Mon- 

treal       312 

18.  Traffic  to  and  from  Montreal 313 


CONTENTS  xvli 

SECTIOX  PAGE 

19.  Canadian  Pacific  Ports 31 '3 

20.  St.  John  and  Halifax 313 


CHAPTER  VIII 

STATUS  OF  AMERICAN  AND  CANADIAN  MERCHANT 
MARINE,  AND  RECENT  LEGISLATION 

1.  Present  Role  of  American  Shipping     ....    316 

2.  Coastwise  Tonnage 316 

3.  Merchant  INIarine  a  National  Question      .       .       .317 
■i.  Beginnings  of  Our  Merchant  Marine   .       .       .       .317 

5.  Development  of  Shipping  Checked       ....    318 

6.  •    Shipping  Begins  to  Decline 319 

7.  Recent  Tendencies 319 

8.  American  Merchant  Marine  Compared  to  Others  320 

9.  United  States'  Steam  Foreign  Trade  ....    321 

10.  Awakening  Interest 322 

11.  Adverse  Economic  Conditions 323 

12.  Congressional  Attempts  to  Aid 323 

13.  New  Conditions  Caused  by  the  European  War    .    324 

14.  Ship  Purchase  Bill 326 

15.  Seamen's  Law 327 

16.  Loss  of  Pacific  Trade 328 

17.  Purchase  of  the  Pacific  Mail 329 

18.  Status  on  the  Atlantic 329 

19.  British  Restrictions 330 

20.  Present  Role  of  Canadian  Shipping      ....    331 

21.  The  Lake  Fleet 331 

22.  Seagoing  Coasting  Trade 333 

23.  Dry  Dock  and  Dry  Dock  Subsidy  Policy  .       .       .    334 

24.  Another  Form  of  Government  Aid 335 

25.  Discrimination  Against  a  Canadian  Marine     .       .    336 

26.  Proposals  of  the  Dominion  Government    .       .       .    337 

27.  Suggested  Form  of  Government  Aid    ....    338 

28.  Other  Proposals 338 

XV— 2 


xvUi  FOREIGN  TRADE 

CHAPTER  IX 

SHIPPING  PROBLEMS  IN  WAR  TIME 

SECTION  p^^jj 

1.  War  Problems  Displace  Peace  Conditions  .       .       .  340 

2.  Demand  for  Ships 34,1 

3.  Operations  of  the  Shipping  Board  .....  342 

4.  New  Shipyards  Necessary 344 

5.  Materials  Needed 345 

6.  Labor  Available  not  Adequate 346 

7.  Operating  the  Ships 347 

8.  Government  or  Private  Operation 348 

9.  American  Shipping  as  Part  of  World's  Shipping  .  349 

10.  World's  Tonnage  in  1914 -351 

11.  Changes  Wrought  by  War 352 

12.  Shipping  Losses 354 

13.  Meeting  the  Losses 354 


PART  I 
FOREIGN  TRADE 


FOREIGN  TRADE 

CHAPTER  I 

A  NEW  ERA  IN  AMERICAN  BUSINESS 

1.  New  tendencies  in  the  foreign  policy  of  the 
United  States. — Washington,  in  delivering  his  fare- 
well address,  laid  down  the  basis  of  the  foreign  policy 
that  this  nation  was  to  follow  for  almost  a  century, 
when  he  uttered  the  following  words : 

The  great  rule  of  conduct  for  us  in  regard  to  foreign  na- 
tions is,  in  extending  our  commercial  relations,  to  have  witli 
them  as  little  political  connection  as  possible.  So  far  as  we 
have  already  formed  engagements,  let  them  be  fulfilled  with 
perfect  good  faith.     Here  let  us  stop. 

This  sentiment  was  the  keynote  of  all  the  foreign 
relations  of  the  United  States  until  the  time  when  the 
fortunes  of  war  transferred  to  us  the  Spanish  colonies. 
The  Monroe  Doctrine  was  largely  an  expression  of  our 
desire  not  to  become  entangled  in  foreign  affairs.  The 
thought  that  international  matters  concerned  Europe 
only,  and  not  ourselves,  has  long  lingered  in  the  public 
mind,  and  probably  is  largely  responsible,  even  today, 
for  the  attitude  of  the  average  American  toward  for- 
eign commerce.     To  him,  foreign  trade  is  somewhat  in 


4  FOREIGN  TRADE 

the  nature  of  a  venture,  individual  in  character,  and 
the  idea  of  an  organized  national  policy  in  foreign 
coroinerce  is  new  to  him.  It  is  important  to  remem- 
ber that  there  was  a  strong  economic  basis  for  this 
provincial  attitude  of  mind.  Vast  unexploited  re- 
sources in  the  United  States  that  promised  the  yield 
of  large  profits  caused  the  American  to  concentrate 
on  a  domestic  policy. 

2.  Recent  economic  changes. — ^While  this  mental 
attitude  of  the  people  has  undergone  little  change,  a 
new  order  of  things  has  been  brought  about  by  the 
growth  of  knowledge  and  skill  and  by  the  progress  of 
invention.  Hardly  a  century  ago  foreign  commerce 
was  confined  to  dealings  in  a  small  range  of  articles. 
Today  it  has  burst  these  bounds.  The  multiplica- 
tion and  modernization  of  the  means  of  transpor- 
tation have  enormously  reduced  the  cost  of  carriage. 
Modern  transportation  supplied  the  means,  just  as  the 
enormous  output  of  machine  production  supplied  the 
incentive,  for  distributing  over  the  world  the  products 
of  the  wealth  and  labor  of  every  country. 

The  great  European  war  has  taught  us  how  the 
commercial  interdependence  of  nations  reacts  upon 
their  political  relationships.  The  time  of  Washing- 
ton is  not  our  time,  the  domestic  past  must  give  way 
to  an  international  future.  The  world  is  no  longer 
patient  with  passive  onlookers.  It  recognizes  only 
active  workers.  Just  as  England  had  to  give  up  her 
long-cherished  policy  of  "splendid  isolation,"  just  as 
Bismarck's  conception  that  Germany's  interests  were 


NEW  BUSINESS  ERA  5 

bound  by  the  borders  of  Europe,  was  superseded  by 
the  slogan  "Germany's  future  lies  upon  the  water," 
just  so  this  country  has  been  drawn  into  the  whirl- 
pool of  world  politics,  because  it  has  been  drawn  into 
the  circle  of  world  trade. 

3.  Energetic  pursuit  of  foreign  trade  an  economic 
necessity. — To  be  sure,  this  country  for  many  decades 
past,  has  been  engaged  in  foreign  trade.  Even  before 
the  European  war,  the  volume  of  our  exports  and 
imports  had  reached  astounding  figures,  altho  our  for- 
eign trade  was  small  in  proportion  to  our  domestic 
commerce.  Our  exports  consisted  largely  of  food- 
stuffs and  raw  materials — commodities  which  practi- 
cally market  themselves.  The  considerable  increase 
during  recent  years  in  the  export  of  manufactured 
goods  has  been  largely  the  result  of  the  splendid  pio- 
neer work  of  a  few  large  corporations  that  have  been 
for  many  years  building  up  their  trade  in  foreign  mar- 
kets with  energy  and  intelligence.  Xot  until  recently, 
however,  has  it  been  recognized  that  it  is  necessary  for 
the  nation  to  enter  into  competition  on  a  large  scale  for 
the  markets  of  the  world,  and  to  sell  in  those  markets, 
not  the  wealth  of  our  soil  before  American  labor  has 
been  added  to  it  in  any  form  whatever,  but  the 
products  of  American  industries.  The  time  has  come 
when  we  must  realize  that  it  is  wiser,  from  a  national 
standpoint,  to  export  flour  rather  than  wheat,  cot- 
ton goods  rather  than  raw  cotton,  electrical  appli- 
ances rather  than  copper  in  its  crude  state.  We  sell 
at  12  cents  a  pound  cotton  that  represents  hardly  any 


6  FOREIGN  TRADE 

labor,  and  buy  it  back  from  the  thrifty  Swiss  at  $40 
a  pound  in  the  form  of  fine  handkerchiefs — which  rep- 
resent little  except  labor.  This  country  has  today 
reached  a  point  in  its  economic  development  where  the 
systematic  and  energetic  promotion  of  the  export  of 
manufactured  products  is  an  absolute  necessity,  a 
prerequisite  of  further  growth  along  right  lines. 

It  is  only  right  to  give  reasons  for  such  a  statement. 
History  furnishes  the  first  reason.  Every  young  and 
developing  nation  passes  thru  four  stages  of  evolution. 
At  first  it  has  to  rely  upon  the  import  of  machinery 
and  other  manufactured  goods  for  the  development  of 
its  natural  resources.  Since  it  is  unable  to  pay  for 
this  foreign  capital  brought  in  on  credit  for  the  pur- 
pose of  exploiting  its  resources,  it  becomes  indebted 
to  other  countries  for  the  amount  by  which  the  value 
of  its  imports  exceeds  the  value  of  its  exports.  As 
the  development  of  the  land  proceeds,  and  increasing 
quantities  of  raw  materials,  grains,  meats  and  the 
more  valuable  minerals  are  exported,  the  country 
gradually  gains  a  position  where  it  is  able  to  pay  in 
the  form  of  commodities,  not  only  for  its  imported 
goods  but  also  for  interest  on  foreign  obligations 
and  for  services  rendered  by  foreign  shipping  com- 
panies, bankers  and  insurance  companies.  The  tran- 
sition from  this  second  phase  to  the  third  is  almost 
imperceptible.  It  consists  in  a  further  increase  of  the 
export  surplus  to  a  point  where  not  only  all  obli- 
gations to  foreign  nations  are  met,  but  the  indebted- 
ness to  foreign  capital  is  reduced.    The  fourth  stage 


NEW  BUSINESS  ERA  7 

is  that  already  reached  by  the  great  manufacturing 
nations  of  Europe,  which  have  passed  the  debtor  stage 
and  have  succeeded  in  reversing  their  positions  and 
becoming  creditors.  Again,  just  as  in  the  first  phase 
of  evohition,  the  imports  exceed  exports,  now — not  as 
a  result  of  borrowings  but  of  lendings — the  excess  of 
imports  over  exports  represents  largely  the  payment 
of  interest  on  capital  invested  in  foreign  countries. 
In  economic  terms,  the  typical  historical  development 
is  this:  the  unfavorable  trade  balance  of  the  first 
j)eriod  is  reversed  in  the  second  to  a  favorable  one. 
The  third  stage  represents  merely  an  intensification 
of  the  conditions  of  the  second,  while  during  the 
fourth  a  return  to  the  unfavorable  trade  balance  takes 
place. 

4.  Favorable  trade  balance. — When  we  speak  of 
favorable  trade  balance,  we  refer  to  that  state  of  a 
country's  foreign  trade  in  which  the  value  of  its  ex- 
ports exceeds  that  of  its  imports.  Such  a  trade 
balance,  if  confined  to  the  visible  trade,  is  really 
fictitious.  The  exchange  of  commodities  forms  only 
a  part  of  the  commercial  relationship  of  one  nation 
with  another.  The  services  of  bankers,  carriers, 
insurers  and  investors  are  the  invisible  exports  that 
largelj''  pay  for  the  imports  of  commodities.  The  in- 
debtedness incurred  by  tourists  abroad,  and  the  remit- 
tance of  money  to  relatives  and  friends  in  other 
countries,  are  other  factors  which  have  a  strong  bear- 
ing upon  the  true  balance  of  international  obligations. 

5.  Influence  of  the  European  war  upon  our  exports. 


8  FOREIGN  TRADE 

— The  existence  of  a  "favorable  trade  balance"  for  any 
length  of  time,  is  a  myth.  Foreign  trade  is  really 
barter,  and  if  we  do  not  receive  commodities  in  pay- 
ment for  om'  exports,  we  are  sure  to  receive  other 
forms  of  value.  It  has  been  stated  that  the  "favorable 
trade  balance"  of  this  country,  amounting  in  normal 
times  to  a  half  billion  dollars,  does  not  suffice  as  a 
means  by  which  to  meet  our  annuallj'^  recurring  pay- 
ments abroad,  of  which  the  chief  are  caused  by  tourists' 
expenditures,  remittances  to  friends,  freight  payments 
for  ocean  transportation,  and  interest  on  American 
securities  held  abroad.  Accordingly,  the  actual 
balance  of  our  international  payments  in  normal  times 
is  said  to  be  really  unfavorable  to  us.  Thus,  before 
the  European  war,  we  were  still  in  the  second  stage 
of  economic  development.  The  extraordinary  con- 
ditions caused  by  the  war  have  increased  to  more  than 
three  billion  dollars  per  year,  the  excess  value  of  our 
exports  over  our  imports.  This  condition  has  ad- 
vanced us  into  the  third  stage ;  that  is,  it  has  placed  us 
in  a  position  where  we  have  begun  to  reduce  our 
foreign  indebtedness.  And  indications  point  to  the 
probability  that  we  are  rapidly  approaching  the 
fourth  stage,  that  of  a  creditor  nation. 

6.  What  carports  should  be  stimulated? — If  we  wish 
to  derive  lasting  benefit  from  these  conditions — to 
shake  off  once  for  all  our  dependence  upon  European 
capital,  and  to  become  permanently  a  creditor  nation, 
we  must  continue  to  increase  our  export  not  only 
of  commodities  but  also  of  services  and  of  capital. 


NEW  BUSINESS  ERA  9 

We  must,  therefore,  enlarge  the  services  of  our  bank- 
ers, build  up  a  great  merchant  marine  and  develop  our 
insurance  business.  Before  we  can  export  capital  on  a 
large  scale,  we  must  first  accvmiulate  so  much  capital 
that  we  can  spare  some  of  it  for  exportation  to  foreign 
countries  without  depriving  our  domestic  business  of 
the  means  necessary  for  its  development. 

What  shall  be  the  commodities  the  export  of  which 
we  must  stimulate  systematically  and  energetically? 
In  the  past,  foodstuffs  and  raw  materials  formed  the 
bulk  of  our  exports.  It  is  true  that  manufactured 
products  now  play  a  more  important  part  in  our  ex- 
port trade  than  formerly;  thirty-five  years  ago  manu- 
factures constituted  only  15  per  cent  of  our  total  ex- 
ports, whereas  they  now  amount  to  almost  one-half. 
But  even  today  the  export  of  manufactures  embody- 
ing a  large  percentage  of  high-class  labor  is  relatively 
small,  by  no  means  as  great  as  it  should  be  consider- 
ing the  large  supply  of  skilled  labor  from  which  the 
industries  of  this  country  can  draw.  The  proportion 
of  manufactures  to  exports  is  very  much  less  in  this 
country  than  it  is  in  Great  Britain  and  Germany. 

In  the  past,  we  were  justified  in  exporting  mainly 
foodstuffs  and  crude,  or  semi-crude,  materials.  A 
country  naturally  exports  those  commodities  in  the 
production  of  which  it  enjoys  a  relative  advantage 
over  other  countries.  It  exports  those  things  which 
are  low  in  price  within  its  borders,  because  in  produc- 
ing them  it  has  an  advantage  over  other  countries  in 


10  FOREIGN  TRADE 

regard  to  some  of  the  prime  factors  of  production: 
land,  labor,  capital,  transportation  facilities,  and  a 
fifth  factor,  which  is  a  composite  of  business  acumen, 
spirit  of  enterprise,  organizing  ability  and  the  in- 
ventive power.  In  the  early  stages  of  the  economic 
development  of  a  country  the  land  factor  is  of  primary 
importance ;  capital,  at  that  stage,  is  insignificant ;  and 
only  in  the  later  periods,  when  there  is  intensive  in- 
dustrialization, does  labor  (i.e.,  highly  skilled  labor) 
enter  into  the  productive  process.  The  rapid  growth 
of  our  wheat  exports  during  the  past  century  was  due 
to  the  advantage  which  we  enjoyed  over  the  European 
farmer  in  our  vast  tracts  of  new  and  fertile  land. 
Later  on,  the  extensive  application  of  agricultural 
machinery  and  cheap  transportation  became  decisive 
aids  in  our  quest  for  the  world's  markets. 

It  is  economically  sound  for  us  to  export  raw  cotton, 
in  exchange  for  German  chemicals,  so  long  as  the  cost 
of  producing  a  bale  of  cotton  in  the  United  States  is 
less  than  would  be  the  cost  of  producing  in  the  United 
States  the  chemical  which  Germany  is  willing  to  send 
in  exchange  for  that  bale  of  cotton.  But  the  increas- 
ing industrialization  of  this  country  tends  to  eliminate 
more  and  more  the  basic  differences  between  the 
economic  structure  of  this  country  and  that  of  the 
countries  of  Europe.  The  rapid  growth  of  the  city 
population,  with  which  our  agricultural  development 
has  not  kept  pace,  has  reduced  the  surplus  of  food 
stuffs  available  for  export,  and  brought  us  near  the 
point  where  the  importation  of  food  stuffs  will  be  a 


NEW  BUSINESS  ERA  11 

necessity,  and  where  our  food  supply,  instead  of  being 
a  resource,  will  constitute  a  serious  problem.  The 
industrialization  of  vast  sections  of  the  United  States 
increases  both  the  possibility  and  the  necessity  of  pro- 
tecting our  national  resources,  and  of  exporting  them 
only  after  a  considerable  amount  of  labor  has  been 
added.  Finally,  the  industrial  development  of  this 
country  resulting  from  the  European  war,  has  given 
us  a  productive  capacity  that  cannot  possibly  be  util- 
ized unless  we  extend  our  exports  of  manufactures. 

7.  Imperative  need  for  a  national  foreign  trade 
policy. — These  considerations  serve  to  show  that  the 
advantages  of  our  great  natural  resources  cannot  take 
the  place  of  those  to  be  derived  from  increasing  our 
exports.  The  systematic  development  of  the  exporta- 
tion of  manufactured  products  becomes  imperative  as 
a  national  policy. 

Up  to  this  time,  a  definite  national  foreign-trade 
policy  has  not  been  necessary.  We  may  say  that  our 
foreign  trade  of  the  past  sprang  up  spontaneously 
because  of  the  variety,  richness  and  abundance  of  our 
natural  resources.  It  was  largely  a  non-competitive 
trade.  The  market  was  there.  The  goods  sold  them- 
selves. Our  trade  was  mainly  with  Europe,  and  it 
flourished  simply  because  we  produced  things  that 
were  different  from  those  produced  over  there.  But 
now  that  manufactured  products  are  to  move  into  the 
foreground,  our  production  will  cease  merely  to  sup- 
plement that  of  Europe.  The  trade  relations  that 
now  exist  between  the  two  continents  will  be  largely 


12  FOREIGN  TRADE 

superseded  by  an  intense  rivalry  in  competitive  mar- 
kets in  foreign  lands,  such  as  South  America  and  the 
Far  East. 

All  this  does  not  mean,  however,  that  we  must 
plunge  into  unprofitable  ventures,  individually,  mere- 
ly because  our  doing  so  might  be  advantageous  for  the 
country  as  a  whole.  It  would  be  senseless  to  advocate 
a  foreign  trade  policy  whose  realization  would  be  a 
burden  on  those  who  would  have  to  carry  it  out. 

8.  Foreign  trade  development  profitable  to  our 
industries. — The  systematic  development  of  the  ex- 
portation of  our  industrial  products  would  prove 
profitable  to  our  manufacturers.  It  would  bring  a 
more  steady  and  continuous  prosperity  to  our  indus- 
tries. In  the  words  of  Secretary  William  C.  Redfield, 
of  the  Department  of  Commerce : 

We  have  learned  the  lesson  that  our  factories  are  so  large 
that  their  output  at  full  time  is  greater  than  America's  mar- 
kets can  continuously  and  regularly  absorb;  we  know  now 
that  if  we  will  run  full  time  all  the  time,  we  must  do  it  by 
reason  of  the  orders  we  take  from  lands  beyond  the  sea.  To 
do  less  than  that  means  homes  in  America  in  which  the  hus- 
bands are  without  work;  it  means  factories  that  are  shut 
down  part  of  the  time.  And  because  the  markets  of  the 
world  are  greater  and  steadier  than  the  markets  of  any  one 
country  can  be,  and  because  we  are  strong,  we  are  going  to 
go  out  into  the  markets  of  the  world  and  get  our  share. 

Additional  orders  from  any  source  tend  to  reduce 
the  overhead  expenses  of  production,  and  tend  also 
to  reduce  the  cost  of  raw  materials  by  increasing  the 
quantity  bought.     All  the  advantages  of  large-scale 


NEW  BUSINESS  ERA  13 

production  come  into  play  when  these  extra  orders  are 
received.  In  normal  times  the  production  of  the 
factories  of  the  country  could  be  increased  25  per 
cent  if  those  factories  were  run  to  full  capacity. 
Moreover,  this  last  25  per  cent  that  would  bring  full 
capacity,  could  be  gained  at  a  much  lower  proportion- 
ate unit  cost  than  the  first  75  per  cent. 

Increased  orders  from  foreign  countries  tend  to 
change  the  seasonal  demands  to  year-round  demands. 
Few  people  realize  the  great  advantage  that  the  manu- 
facturer derives  when  he  possesses  a  market  for  his 
products  in  the  southern  hemisphere,  where  the  seasons 
are  exactly  the  reverse  of  our  own. 

The  business  man  who  recalls  the  panics  of  1893  and 
1907  knows  the  effect  that  a  domestic  business  crisis 
produces  upon  his  organization,  A  well-balanced 
export  trade  of  25  per  cent  of  his  domestic  business 
would  have  carried  almost  any  manufacturer  of 
branded  products  thru  these  periods  of  domestic  panic 
without  serious  loss. 

Mr.  James  A.  Farrell,  President  of  the  United 
States  Steel  Corporation,  has  thus  expressed  his  view 
on  this  situation: 

No  issue  is  of  more  vital  importance  to  the  welfare  of 
American  industrial  enterprises  and  labor  than  the  stimula- 
tion of  our  commerce  abroad.  It  is  a  recognized  fact  that 
extensive  trade  over  the  seas  tends  to  stabilize  industry  by 
insuring  to  manufacturers  and  producers  a  larger  sphere  of 
activity. 

9.  Foreign   trade   expansion   a   road   to   national 


14i  FOREIGN  TRADE 

power. — Great  results  may  follow  an  expansion  of 
our  foreign  trade.  In  this  connection  Senator  Oscar 
W.  Underwood  has  said : 

The  benefits  which  may  flow  from  foreign  trade  are  not 
confined  to  those  of  pecuniary  appeal  to  private  capital  and 
individual  initiative.  In  a  nation,  commercial  and  industrial 
relations  may  often  be  justified  in  terms  of  national  power 
and  security.  An  aggressive  foreign  policy  is  an  essential 
of  defensive  nationalism  for  the  United  States. 

The  nations  of  the  world  are  no  longer  concerned 
with  military  aggrandizement  so  much  as  they  are 
with  commercial  prestige.  The  contest  today  is  for 
supremacy  of  trade  in  the  world's  markets,  because 
that  country  which  is  a  power  in  the  field  of  commerce 
is  a  power  in  other  fields  also.  Sir  Walter  Raleigh 
once  said:  "the  nation  which  controls  the  sea  controls 
trade,  and  the  nation  which  controls  trade  controls 
the  world." 

It  follows  that  in  carrjang  on  foreign  trade,  men 
must  think  in  terms  of  national  competition.  In 
China  and  South  America  the  contest  is  not  so  much 
between  individual  corporations  as  it  is  between 
national  industries.  Hence  the  merchant  or  manu- 
facturer who  exerts  his  energy  and  wit  to  promote 
foreign  trade  serves  his  own  interests,  and  at  the  same 
time  contributes  his  share  toward  enlarging  the 
political  influence  and  prestige  of  his  country  abroad. 
He  should  go  into  foreign  markets  not  merely  as  one 
who  expects  to  reap  a  harvest,  but  also  as  one  who  is 
sowing  the  seed  of  good-will  from  which  his  country 


NEW  BUSINESS  ERA  15 

will  benefit.  In  short,  the  business  man  who  goes 
into  foreign  markets  should  feel  that  he  is  a  repre- 
sentative of  the  highest  ideals  of  his  nation. 

10.  Present  time  affords  ideal  opportunity  for  the 
expansion  of  foreign  trade. — Thus,  from  both  within 
and  without  there  comes  to  America  the  call  to  ex- 
pand its  sphere  of  activity  in  foreign  lands.  Not 
only  has  the  time  come  when  it  seems  both  expedient 
and  necessary  to  stimulate  this  development,  but 
Providence  has  seemed  to  favor  this  step  by  removing 
impediments  and  aiding  our  efforts. 

Several  great  events  have  recently  occurred  in  this 
country  which,  altho  they  are  not  all  primarilj^  related 
to  the  development  of  foreign  trade,  have  a  most  bene- 
ficial influence  upon  it.  These  are:  the  completion 
of  the  Panama  Canal;  the  recent  development  of  the 
American  shipbuilding  industry  and  of  the  American 
merchant  marine ;  the  passing  of  the  Federal  Reserve 
Law ;  and,  in  a  more  indirect  way,  the  establishing  of 
the  Federal  Trade  Commission.  The  opening  of  the 
Panama  Canal  has  brought  large  markets  nearer  to 
the  producing  centers  of  this  country,  thus  placing 
the  American  manufacturer  on  a  more  favorable  basis 
in  relation  to  his  foreign  competitors.  The  develop- 
ment of  the  shipbuilding  industry  and  of  our  merchant 
marine  promises  to  increase  the  number  of  ocean  car- 
riers available  to  us.  The  Federal  Reserve  Law  ex- 
tends the  activities  of  national  banks  to  other  lands, 
and  grants  to  the  American  exporter  the  support  of  his 
own  banks,  placing  him  on  a  par  with  his  foreign 

XV— 3 


16  FOREIGN  TRADE 

competitors.  Finally,  the  establishment  of  the 
Federal  Trade  Commission  bids  fair  to  remove  from 
our  foreign  trade  the  fetters  that  restrictive  legislation 
has  imposed  upon  it.  The  Federal  Trade  Commis- 
sion has  fathered  the  Webb  Exporting  Bill,  which 
seeks  to  allow  our  merchants  to  combine  in  the  pro- 
motion of  export  trade. 

Then  came  the  great  European  war.  A  prominent 
banker  has  thus  described  the  influence  it  has  had  upon 
the  United  States : 

It  opened  to  this  country  the  great  opportunity — not  to 
dispossess  and  occupy  the  places  left  temporarily  vacant  by 
our  warring  brethren  across  the  sea,  but  the  opportunity 
to  complete  and  establish  permanently  the  institutions  and 
principles  requisite  for  foreign  commerce.  Half  the  trade 
of  the  world  has,  temporarily  at  least,  been  cut  loose  from 
its  moorings.  The  amazing  circumstance  of  much  of  South 
America  with  no  buyer  for  its  products,  or  no  facilities  for 
their  financing  and  shipment,  and  the  enormous  German 
trade  of  Russia  suddenly  offered  to  the  new  world,  has  awak- 
ened the  imagination  of  this  country.  The  half-time  laborer 
in  the  idle  mill,  noting  the  feverish  activity  in  a  neighboring 
plant  working  on  an  export  contract,  begins  to  see  the  sig- 
nificance of  foreign  commerce  to  domestic  affairs.  No  sit- 
uation could  be  more  favorable  for  bringing  about  a  full 
recognition  and  understanding  of  not  only  the  necessity  for 
foreign  trade,  but  the  opportunity  in  foreign  trade;  for 
breaking  down  the  distinctions  between  foreign  trade  and 
domestic  trade  existing  in  the  public  mind ;  for  the  establish- 
ment of  a  strong  constructive  national  policy  which  shall 
require  that  no  product  be  sold  abroad  which  has  not  first 
been  brought  to  the  highest  state  of  manufacture,  a  policy 
which  shall  solidly  support  merchants,  manufacturers  and 
government  policies  to  that  end. 


NEW  BUSINESS  ERA  17 

11.  Factors  that  have  already  aided  foreign-trade 
expansion. — The  American  Government  is  keenly 
eager  to  further  this  pohcy.  The  Shipping  Bill,  the 
Webb  Export  Bill,  the  Pan-American  Financial  Con- 
ference, and  the  work  of  the  International  High  Com- 
mission, simply  serve  to  illustrate  the  manifold  ways 
in  which  Washington  is  trying  to  aid  the  new  move- 
ment. Business  also  is  beginning  to  realize  the  value 
of  the  opportunity.  Merchants'  and  manufacturers' 
associations,  boards  of  trade,  and  chambers  of  com- 
merce are  giving  their  fullest  attention  to  the  problem 
of  the  expansion  of  our  foreign  trade.  The  creation 
of  the  National  Foreign  Trade  Council,  and  the 
organization  of  the  American  International  Corpora- 
tion, the  Latin-American  Development  Company, 
and  others,  as  well  as  the  establisliment  of  foreign 
branches  of  national  banks,  are  unmistakable  signs 
of  a  new  era  in  the  foreign  trade  of  this  country,  and  of 
a  new  day  in  the  development  of  American  business. 

12.  What  must  still  he  done. — And  yet,  only  a 
beginning  has  been  made.  Before  the  potential  trade 
possibilities  have  been  turned  into  actual  achievement, 
much  prejudice  must  be  overcome,  many  a  lesson  must 
be  learned,  much  information  of  a  reliable  and  useful 
character  must  be  disseminated.  Modern  business 
is  a  science.  This  is  true  in  general,  but  it  is  especially 
true  as  regards  foreign  trade.  Careful  calculation, 
scientific  methods  of  accounting,  a  more  thoro  study 
of  all  conditions — geographic,  economic,  social,  legal 
— bearing  upon  the  business  possibilities  in  foreign 


18  FOREIGN  TRADE 

markets ;  all  these  are  prerequisites  of  success.  But  if 
this  country  wishes  to  avail  itself  fully  of  its  oppor- 
tunity, it  must  realize  that  the  task  ahead  is  difficult — 
difficult  because  of  the  strength  of  our  competitors, 
temporarily  absent,  who  were  long  ago  intrenched  in 
these  markets ;  difficult  also,  because  of  the  complexity 
of  the  problems  of  foreign  trade. 

It  is  true  that  the  United  States  enjoys  valuable 
advantages  that  none  of  its  competitors  possess,  be- 
cause of  its  unequalled  supplies  of  cheap  food  and  of 
raw  materials,  and  because  of  the  vast  protected  home 
market,  which  furnishes  a  basis  for  manufacturing  on 
a  large  scale.  This  last  factor  has  reduced  overhead 
expense  to  such  an  extent  that  the  handicap  of  high 
labor  cost  is  largely  offset. 

But  our  merchants  are  still  in  a  large  degree  un- 
trained and  inexperienced  in  the  customs  and  methods 
of  foreign  trade.  The  uncertainty  of  the  legal  status 
of  foreign  commercial  activities  prevents  the  use  of 
the  most  efficient  method  of  handling  of  our  export 
trade — namely,  cooperation.  Mr.  Frank  A.  Vanderlip, 
President  of  the  National  City  Bank  of  New  York, 
says:  "We  are  a  nation  of  amateurs  in  the  drafting 
of  commercial  treaties."  And  especially,  we  lack  as 
yet  a  national  commercial  policy  similar  to  the  policies 
possessed  by  our  most  formidable  competitors. 

Success  in  foreign  trade  depends  upon  the  serious- 
ness with  which  a  nation  is  willing  to  enter  mi- 
accustomed  fields,  and  to  take  risks  with  which  it  is 
not   familiar.     Success   depends   upon   the   nation's 


NEW  BUSINESS  ERA  19 

readiness  to  adapt  itself  to  the  requirements  of  various 
markets;  upon  the  wiUingness  of  its  investors  to  pre- 
pare the  path  of  its  trade;  upon  its  enthusiasm,  its 
sense  of  fair  play  and  its  vision.  In  the  last  analysis, 
a  nation's  success  in  this  field  depends  upon  the 
economic  power  that  it  can  exert  in  the  world  markets, 
and  upon  the  national  power  supporting  it.  Mr. 
Frank  A.  Vanderlip  expresses  himself  as  follows  on 
this  subject:  ^ 

We  will  hold  but  loosely  that  trade  which  we  attempt  to 
grasp  not  because  we  can  hold  it  with  true  economic  force, 
but  because  for  the  moment,  our  competitors  are  placed  at 
a  disadvantage  .  .  . 

REVIEW 

Describe  the  traditional  attitude  of  the  American  citizen  and 
American  busmess  man  towards  foreign  affairs  and  foreign  trade. 
What  was  the  reason  for  this  attitude,  and  what  forces  have  in 
recent  years  tended  to  modify  it? 

Explain  the  four  stages  of  economic  development  which  are 
reflected  in  the  visible  balance  of  trade  with  foreign  countries. 

Compare  present  conditions  in  American  export  trade  with 
those  of  a  generation  ago.  Why  do  recent  tendencies  impose 
new  obligations? 

If  the  European  war  has  greatly  stimulated  our  production  ca- 
pacity, how  can  this  increased  output  be  maintained  when  the 
war  closes? 

Note  the  ten  recent  tendencies  of  our  foreign  trade,  and 
enumerate  the  various  facts  and  agencies  which  may  be  impor- 
tant in  promoting  the  export  of  manufactured  products. 

1  The  Americas,  February,  1916. 


CHAPTER  II 

A  TRANSITION  STAGE  IN  CANADIAN  TRADE 

1.  Former  isolation. — Canada  in  the  early  years  of 
her  development  had  no  paternal  Washington  to  lay 
down  for  her  a  policy  of  politico-commercial  isola- 
tion, but  from  other  sources  decrees  just  as  imperative 
went  forth.  The  result  has  been  that  while  the  United 
States  manufacturers  as  a  class  are  still  novices  in  the 
ways  of  foreign  trade,  Canadian  manufacturers  are 
even  more  amateurish.  The  youthfulness  of  the  na- 
tion, a  high  tariff  centering  interests  at  home,  a  lack 
of  confidence  in  her  ability  to  compete  with  highly- 
specialized  corporations  of  the  United  States,  and  the 
existence  of  certain  manufacturing  disadvantages  in 
Canada  are  among  the  factors  that  explain  the  former 
absorption  of  Canadian  manufacturers  in  the  sheltered 
home  market,  and  their  timidity  in  venturing  forth 
upon  the  ocean  of  world  trade.  Their  typical  atti- 
tude is  illustrated  by  the  oft-heard  words: — "Why 
should  I  bother  with  the  trouble  and  risk  of  trading 
with  the  ends  of  the  earth,  when  I  have  a  big  enough 
job  here  at  home."  A  result  of  this  attitude,  with 
a  few  notable  exceptions,  was  that  Canadians  did  not 
concern  themselves  with  foreign  markets;  they 
thought  of  them  as  possible  outlets  only  when  the 
home  market  was  depressed. 

20 


CANADA'S  TRANSITIONAL  STAGE  21 

2.  Canada's  commercial  policy. — It  would  not  of 
course  be  correct  to  say  that  Canada  has  not  had  a 
national  commercial  policy.  It  has  had  a  national 
policy,  characterized  by  an  attempt  to  retain  the  home 
market  for  domestic  manufactures,  and  for  the  rest, 
by  an  heroic  endeavor  at  whatever  cost,  to  direct 
national  growth  along  the  lines  of  greatest  resistance. 
The  Dominion  deliberately  set  itself  to  the  task  of 
building  up  a  separate  nation  on  the  northern  half  of 
the  Continent  and  forced  human  nature  to  triumph 
over  the  laws  of  economics  and  geography  which  would 
confine  transportation,  trade  and  social  existence  to 
lines  running  north  and  south  instead  of  east  and  west 
as  at  present.  Canada  resolved  to  cast  in  her  lot 
with  the  United  Kingdom  rather  than  with  the  United 
States,  to  restrict  trade  with  the  latter  country  lest 
too  close  commercial  relations  might  involve  political 
subordination,  and  to  remain  an  integral  part  of  the 
British  Empire  bearing  the  sacrifices  and  reaping  the 
rewards  that  such  a  connection  might  bring.  So  we 
find  the  giving  of  the  British  Preference  in  1899  de- 
signed to  encourage  the  flow  of  trade  into  Imperial 
channels,  and  the  attempting  more  recently  by  Can- 
adian Ministers  to  find  markets  in  remote  parts  of 
the  world.  These  resulted  in  the  signing  of  commer- 
cial treaties  with  the  British  West  Indies,  France, 
Italy  and  a  number  of  other  nations.  Canada  has 
now  an  elaborate  four-scheduled  tariff  which,  if  tariff 
negotiations  can  open  doors  to  trade,  should  prove 
effective  for  that  purpose. 


22  FOREIGN  TRADE 

3.  General  character  of  Canada's  foreign  trade. — 
What  has  been  said  ah*eady  concerning  the  indiffer- 
ence of  manufacturers  does  not  mean  that  Canada's 
foreign  trade  is  non-existent  or  unimportant.  On  the 
contrary  it  has  shown  in  the  last  twenty  years  an 
expansion  to  which  only  that  of  Argentina  can  com- 
pare. Between  1895  and  1914  the  total  of  foreign 
trade  increased  over  five-fold — from  224  million  to 
1,130  million,  and  total  exports  over  four-fold — from 
114  milhon  to  479  million. 

As  in  the  United  States,  and  to  an  even  greater 
extent,  Canada's  export  trade  consisted  largely  of 
foodstuffs  and  raw  materials.  The  greatest  and 
steadiest  growth,  moreover,  in  this  twenty-year  boom 
period  was  in  the  case  of  those  products  which  make 
the  least  demands  on  the  labor  force.  Wheat  and 
other  grains,  forest  products,  seeds  (chiefly  flax), 
flour,  cheese,  copper,  hides  and  cattle  are  among  the 
most  important  items.  Of  manufactured  goods,  the 
greater  part  of  the  exports  consisted  of  such  com- 
modities as  flour,  bacon,  cheese,  canned  salmon,  wood- 
pulp  and  lumber  products.  These  represent  the  first 
working  up  of  natural  products  and  are  usually 
classified  under  farm,  sea  or  forest  products.  Among 
the  more  highly  manufactured  articles,  paper,  agri- 
cultural implements,  automobiles,  iron  and  steel  goods, 
leather,  carriages,  aluminum,  chemicals  and  cottons 
go  farthest  in  swelling  the  export  figures. 

It  is  significant  that  the  United  Kingdom  takes 
49  per  cent  of  Canadian  exports  and  sends  ordinarily 


CANADA'S  TRANSITIONAL  STAGE  23 

only  about  24  per  cent  of  the  imports ;  that  the  United 
States  buys  37  per  cent  of  the  total  exports  and  sells 
to  Canada  over  64  per  cent  of  her  imports.  This  con- 
dition exists  in  spite  of  the  persistent  political  en- 
deavor to  find  wider  markets  and  the  negotiations 
of  commercial  treaties;  no  other  one  country  counts 
for  3  per  cent  of  Canada's  exports  or  imports. 

4.  Canada  formerly  in  the  first  stage. — Previous  to 
1914  Canada  was  in  the  first  of  those  economic  stages 
thru  which  most  countries  pass.  A  young  and  unde- 
veloped nation,  she  had  been  borrowing,  especially 
since  1902,  enormous  amounts  of  foreign  caj)ital. 
These  loans  were  primarily  to  finance  the  opening 
up  of  the  "Last  Best  West,"  to  provide  the  railways, 
towns,  elevators  and  other  equipment  required  b}^  the 
thousands  of  immigrants  who  were  being  attracted 
to  Canada  by  a  spirited  immigration  policy.  The 
total  amount  already  borrowed  for  these  and  other 
purposes  is  approximately  $3,725,000,000,  of  which 
$2,914,000,000  came  from  Great  Britain  and  $637,- 
000,000  from  the  United  States.  When  taken  in  con- 
junction with  the  figures  for  Canadian  imjiort  trade, 
this  shows  that  American  goods  financed  the  English 
loans  to  Canada.  In  the  years  immediately  preceding 
the  European  war,  Canada's  annual  borrowings  were 
roughly  $300,000,000.  This  was  nation-building  at 
an  unprecedented  rate  and,  after  1902,  was  reflected 
naturally  in  a  huge  and  rapidly  expanding  unfavor- 
able balance  of  trade.  In  the  calendar  year  1913, 
this  excess  of  imports  amounted  to  $270,000,000. 


24  FOREIGN  TRADE 

Many  of  the  recent  criticisms  of  Canada's  profligate 
borrowing  involved  certain  mercantilistic  fallacies. 
The  only  important  problem  was  to  insure  that  bor- 
rowed capital  was  being  invested  so  as  to  result  in 
productive  retui'ns.  However,  the  country  was  soon 
bound  to  face  the  problem  of  testing  the  wisdom  of 
its  investments  by  their  productivity,  and  to  find  some 
more  satisfactory  way  of  paying  its  interest  account 
than  by  additional  borrowings.  In  short,  the  situa- 
tion facing  Canada  just  before  the  outbreak  of  the 
war  was  to  change  from  an  excess  of  imports  to  one 
of  exports  and  to  pass  from  the  first  to  the  second 
economic  stage — a  transition  effected  in  some  coun- 
tries by  a  slow  and  silent  process,  in  others  by  a  finan- 
cial crash. 

5.  A  sudden  reversal  in  the  trade  balance. — In  Can- 
ada the  transition  to  the  second  stage  was  accom- 
plished as  if  by  magic,  in  two  short  years.  The  com- 
plete story  is  clearly  told  by  the  following  figures  for 
the  four  calendar  years  ended  in  1916: — 

(Millions  of  Dollars) 

Merchandise                                      1913  19  H  1915  1916 

Imports     488  481  451  767 

Exports 218  428  653  1,112 

Unfavorable  balance   270  53        

Favorable  balance 202       345 

Such  an  achievement  involved  a  change  in  the  balance 
of  $615,000,000  and  an  increase  in  exports  of  410  per 
cent  in  four  years. 


CANADA'S  TRANSITIONAL  STAGE  25 

Canada's  annual  interest  charges  are  now  estimated 
at  $195,000,000.  With  her  present  surplus  of  ex- 
ports, she  can  meet  these  charges  and  still  have  to  her 
credit  $150,000,000.  On  short  time  account  at  least, 
the  war  has  transformed  her  from  a  debtor  to  a  credi- 
tor nation.  In  other  ways  Canada  has  recently  de- 
veloped international  relations  which  may  have  far- 
reaching  effect  on  her  trade  position  in  the  early 
future.  Canada  is  now  finding  herself  financially, 
finding  herself  with  a  variety  and  independence  in 
capital  resources  undreamed  of  before.  This  augurs 
well  for  the  future  upbuilding  of  her  trade. 

6.  Will  the  change  prove  permanent? — Opinions 
differ  as  to  whether  the  increased  exports  and  the 
favorable  balance  will  prove  permanent  or  not.  Some 
fear  a  slipping  back  to  the  old  conditions.  This  much 
at  least  is  certain.  Those  who  believe  that  since  the 
trade  balance  has  been  reversed  and  the  nation  has 
become  a  creditor  nation  on  short-time  account,  Can- 
ada will  no  longer  be  a  borrowing  nation  but  rather 
will  be  able  to  extend  her  trade  by  investing  consider- 
able capital  in  foreign  countries,  are  doomed  to  disap- 
pointment. Canada  has  scarcely  reached  the  third, 
much  less  the  fourth  stage  in  her  national  develop- 
ment. The  necessity  of  funding  short-term  borrow- 
ings of  the  war,  of  financing  the  coming  railway  reor- 
ganization, and  more  importantly,  of  developing  her 
rich  resources,  will  for  many  years  make  Canada  a 
bidder  for  the  world's  surplus  capital. 

As  has  been  stated,  the  war  has  revealed  domestic 


26  FOREIGN  TRADE 

capital  resources  in  unsuspected  magnitude.  But 
these,  tho  probably  subject  to  continuous  increase  un- 
less, as  is  not  probable,  tax  burdens  prove  exhausting, 
will  need  to  be  supplemented  from  abroad.  Great 
Britain  will  be  drawn  upon  once  more,  tho  probably 
on  a  smaller  scale  than  in  the  previous  boom  period. 
For  the  rest,  resort  must  be  had  to  Canada's  new- 
found banker,  her  southern  neighbor.  Geographical 
proximity,  bringing  similarity  in  commercial  needs 
and  methods  and  facilitating  personal  investigation; 
the  soundness  of  Canada's  political  and  financial  con- 
ditions, especially  in  contrast  with  alternative  outlets 
for  capital ;  the  stake  held  already  in  the  counti-y  thru 
emigration  of  farmers  and  branch  factories ;  the  pres- 
ent extent  of  trade  relations;  the  appeal  of  virgin 
opportunities — these  and  other  forces  will  inevitably 
draw  to  Canada  a  major  portion  of  the  surplus  wealth 
and  loaning  power  which  recently  has  been  brought 
to  the  United  States. 

7.  Necessity  for  increased  production. — Altho 
Canada  may  continue  to  be  a  borrowing  country,  she 
will  probably  not  go  back  to  the  first  stage  of  economic 
evolution.  In  the  first  place,  the  annual  loans  will 
probably  not  be  so  great  as  in  the  record  years  1912 
and  1913.  In  the  second  place,  most  of  the  national 
plant  has  now  reached  the  paying  or  productive  stage, 
and  the  nation  is  going  to  gird  its  loins  for  a  tremen- 
dous increase  in  production.  An  attempt  marked 
by  greater  energy  and  better  organization,  b}^  more 


CANADA'S  TRANSITIONAL  STAGE  27 

cooperation  and  less  state-blindness,  to  garner  the 
utmost  harvest  from  forest  and  mine  and  sea  and 
factoiy,  must  and  will  be  made  in  order  to  secure  a 
larger  share  of  the  home  market  in  certain  favorable 
lines  and  to  build  up  a  surplus  of  exports  at  least 
sufficient  to  pay  the  interest  charges  on  accumulated 
borrowings. 

8.  What  lines  of  production  should  he  stimulated? 
— While  there  is  room  for  increased  production  and 
export  in  all  lines,  we  would  have  a  wrong  perspective 
if  we  did  not  see  the  predominant  importance  of  pri- 
mary production.  First  things  must  be  put  first. 
For  Canada,  at  this  stage  the  foremost  requisite  is 
to  increase  her  basic  products.  As  a  nation  she  is 
justified  in  concentrating  her  energies,  for  the  most 
part,  on  the  export  of  foodstuffs  and  crude,  or  semi- 
crude  materials,  for  it  is  chiefly  in  these  lines  that  her 
people  have  a  relative  advantage  over  other  countries, 
an  advantage  due  primarily  to  nature's  generosity  in 
the  provision  of  resources.  In  the  score  of  years  just 
past,  huge  sums  of  capital  were  spent  mainly  on  indus- 
trial development  of  a  secondary  character,  and  only 
a  surprisingly  small  percentage  of  the  total  borrow- 
ings was  devoted  directly  to  the  extension  and  im- 
provement of  agricultin'e,  mining,  fishing  and  other 
primaiy  industries  upon  which  the  chief  burden  of 
all  the  investments  will  ultimately  fall.  The  good 
result  of  it,  however,  is  that  the  country  now  possesses 
a  national  plant  for  production,  almost  completely 


28  FOREIGN  TRADE 

equipped  in  such  departments  as  transportation,  com- 
munication, city  development,  and  other  similar  fa- 
cihties. 

With  this  as  a  foundation  Canadian  production 
should  go  forward  rapidly  in  all  lines,  especially  in 
the  basic  industries.  In  agi'iculture,  in  which  credita- 
ble progress  has  been  made,  there  is  room  for  almost 
indefmite  expansion.  It  has  been  estimated,  for  in- 
stance, on  the  basis  of  investigation  into  actual  farm- 
ing methods  conducted  by  the  Commission  of  Con- 
servation, that  thru  greater  attention  to  weed  control,- 
proper  rotation  of  crops,  seed  selection  and  other  farm 
processes,  the  field  crops  of  Canada  could  be  doubled 
within  twenty  years  without  any  addition  from  the 
occupation  of  new  lands.  The  opportunity  for  and 
the  urgency  of  building  up  the  live  stock  industry  are 
unquestioned.  In  all  branches,  indeed,  of  this  indus- 
try which  will  remain  the  industrial  backbone  of  Can- 
ada, all  that  is  needed  is  more  men,  more  capital  and 
more  science  in  order  to  swell  the  volume  of  Canada's 
exportable  surplus. 

Equally  favorable  are  the  opportunities  for  in- 
creased exploitation  of  the  forests.  As  the  available 
stand  of  commercial  timber  is  estimated  at  from  400 
to  700  billion  feet,  lumbering  operations  can  be  greatly 
extended  without  endangering  the  future  timber  sup- 
ply. Investigation  of  available  supplies,  prevention 
of  fire  and  other  wastes,  and  the  adoption  of  scientific 
conservation  principles  are  imperative.  In  British 
Columbia,  which  has  an  estimated  timber  stand  of 


CANADA'S  TRANSITIONAL  STAGE  29 

over  300  million  feet,  it  is  said  that  increased  exploita- 
tion depends  largely  upon  the  building  up  of  foreign 
trade  thru  better  shipping  facilities,  strong  selling 
organizations  and  general  improvement  in  the  ma- 
chinery for  capturing  and  retaining  foreign  business. 

In  fishing  and  mining  there  is  the  same  story  of 
inadequate  exploitation  today  and  great  possibilities 
of  expansion  tomorrow.  The  increase  in  the  value  of 
the  output  and  export  of  the  fisheries  in  recent  years 
has  been  due  almost  solely  to  rising  prices.  But  al- 
ready steps  have  been  taken  to  improve  packing,  cur- 
ing and  marketing  methods,  and  in  order  to  increase 
still  further  the  quota  from  this  source  of  natural 
wealth  it  is  only  necessary  to  take  well-recognized  sci- 
entific steps  to  prevent  the  impending  depletion  of 
certain  of  the  valuable  fisheries. 

Canadian  exports  of  minerals  have  not  been  increas- 
ing so  rapidly  as  one  would  expect  judging  from  the 
extent  and  variety  of  wealth  in  this  respect.  This 
is  due  to  the  fact  that  Canada  has  been  exporting 
unrefined  ores,  the  value  of  which  is  much  less  than 
that  of  the  refined  product.  Recommendations  have 
been  made — and  steps  have  actually  been  taken  in 
the  case  of  nickel,  zinc,  copper,  etc. — to  secure  do- 
mestic refining  of  Canadian  minerals,  both  for  home 
consumption  and  for  export,  and  to  establish  such 
basic  industries  as  the  smelting  of  all  metals,  the  manu- 
facture of  nitric  and  sulphuric  acid  and  of  nitrogen 
products  from  the  air,  the  by-product  coking  of  coal, 
etc.     These  are  really  manufacturing  industries  and 


30  FOREIGN  TRADE 

the  considerations  suggested  in  the  next  following 
section  will  be  applicable. 

In  his  annual  address  the  President  of  the  Bank  of 
Montreal,  said  that  there  were  three  objects  to  which 
Canadians  should  bend  every  effort  if  they  were  not 
to  slip  back  into  pre-war  conditions — economy,  pro- 
duction and  immigration.  Add  to  these  conservation 
or  scientific  utilization,  and  provision  of  marketing 
facilities,  and  you  will  have  in  a  nutshell  the  forces 
which  will  determine,  and  the  only  forces  which  need 
limit  Canada's  export  trade  in  so  far  as  natural  prod- 
ucts are  concerned. 

9.  Manufacturing  in  Canada, — As  explained  in  the 
preceding  chapter  the  basic  economic  principle  of 
national  exports  is  that  a  nation  should  export  those 
commodities  in  the  production  of  which  it  enjoys  a 
relative  advantage.  Canada  is  not  at  present  able  to 
compete  with  the  great  manufacturing  nations  of  the 
world.  There  are  many  commodities  on  which  she 
has  already  built  up  or  could  build  up  a  successful 
and  permanent  export  trade.  It  is  to  such  lines  and 
to  such  lines  only,  unless  in  certain  markets  prefer- 
ences are  extended  which  counterbalance  extra  cost, 
that  Canadian  exporters  should  devote  their  exclusive 
attention.  Among  the  goods  that  Canada  should  pro- 
duce on  equal  terms  with  the  world — or  perhaps  on 
even  better  terms — are  certain  lines  of  iron  and  steel 
products,  agricultural  machinery,  flour  and  cereals, 
paper  and  pulp,  wood  and  the  manufactures  thereof, 
leather    goods,    wagons    and    carriages,    aluminum. 


CANADA'S  TRANSITIONAL  STAGE  31 

nickel  and  nickelware,  etc.  In  some  of  these  lines  ex- 
cellent pioneer  work  has  already  been  done  by  a  num- 
ber of  the  larger  Canadian  corporations  whose  success 
in  the  foreign  field  is  both  a  guide  to  the  smaller  manu- 
facturers who  may  follow,  and  a  proof  of  what  Can- 
adian enterprise  can  do. 

10.  Her  present  opportunity, — In  the  past  rela- 
tively little  attention  in  Canada,  as  in  the  United 
States,  needed  to  be  paid  to  methods  and  conditions 
of  exporting  because  by  far  the  major  portion  of  the 
exports  consisted  of  foodstuffs  and  raw  materials 
which,  owing  to  the  staple  world  demand,  practically 
market  themselves.  As  Canada,  however,  attempts  to 
place  her  manufactured  goods  in  open  competition 
with  the  rest  of  the  world,  the  necessity  for  training 
and  cooperation,  for  a  systematic  and  energetic  cam- 
paign, will  soon  become  strikingly  apparent. 

Leaders  in  many  walks  of  Canadian  life  have 
pointed  out  the  ideal  opportunity  that  is  now  offered 
in  the  export  field  and  the  vital  necessity  of  grasping 
it  in  time.  The  way  in  which  Canadian  manufac- 
turers responded  to  the  demands  of  war  was  a  revela- 
tion to  them  of  their  own  power ;  an  indication  of  what 
could  be  accomplished  under  the  spur  of  great  events, 
even  if  not  an  accurate  index  of  what  is  possible  under 
normal  conditions. 

Canadian  manufacturers  have  now  a  better  and  a 
larger  plant  than  ever  before,  one  too  large  in  many 
lines  for  the  requirements  of  the  home  market.  Altho 
much  of  the  special  war  machinery  may  have  to  be 

XV— 4 


32  FOREIGN  TRADE 

scrapped  at  the  end  of  the  war,  yet  many  manufac- 
tui'ers  will  find  themselves  with  new  and  up-to-date 
machinery  for  ordinary  production.  They  will  also 
find  themselves  with  a  skilled  force  of  mechanical 
workers. 

Manufacturers  have  built  up  strong  export  con- 
nections. Many  of  the  secrets  of  exporting  have  been 
opened  to  them.  They  have  become  acquainted  with 
foreign  markets  and  in  many  cases  have  established 
relations  with  foreign  importers.  Many  foreign  im- 
porters have  become  acquainted  with  Canada  for 
the  first  time  and  have  been  awakened  to  the  multi- 
plicity and  quality  of  the  commodities  which  that 
nation  can  supply.  Finally,  in  the  minds  of  some 
thinkers  the  most  important  advantage  will  be  the 
preference — either  a  sentimental  one  or  one  of  a  more 
substantial  kind  in  the  form  of  tariff  favors — which 
Canada  will  possess  over  neutral  nations  in  the  mar- 
kets of  the  allied  countries  as  a  reward  for  her  parti- 
cipation in  the  war.  Already  over  fifty  American 
companies  have  expressed  their  belief  in  this  idea  by 
establishing  branch  factories  in  Canada  in  order  to 
handle  their  export  trade  to  the  markets  of  the  British 
Empire  and  the  other  allied  countries. 

11.  Efforts  that  have  been  made  to  promote  trade. 
— Many  of  the  progressive  business  men  of  Canada 
have  already  established  export  departments  in  their 
business  so  as  to  be  in  a  position  to  make  a  strong 
bid  for  business  when  normal  conditions  are  again 
restored.     An  ably  managed  and  well  organized  ex- 


CANADA'S  TRANSITIONAL  STAGE  33 

port  association,  the  Export  Association  of  Canada, 
has  been  formed  and  in  its  active  operation  is  backed 
by  the  Canadian  Manufacturers'  Association. 

Most  of  the  initiative,  however,  that  has  so  far 
accomphshed  results  has  come  from  governmental 
sources.  Ottawa  is  leading  the  way — tho  criticisms 
are  constantly  made,  urging,  for  instance,  that  busi- 
ness men  should  be  pushed  if  they  will  not  lead,  and 
that  enough  compulsion  should  be  used  to  make  the 
trade  conference  it  proposes  a  fact  and  a  success.  The 
department  si^ecially  concerned  has  taken  a  number 
of  good  practical  steps  to  that  end. 

The  Minister  of  Trade  and  Commerce  has  proposed 
to  improve  the  work  of  his  department  by  the  building 
uj)  of  a  museum  or  bureau  of  commercial  information, 
designed  as  a  clearing-house  for  commercial  and  busi- 
ness information  in  regard  to  Canada  and  foreign 
countries.  This  bureau  would  place  on  permanent 
exhibit  at  Ottawa  samples  of  domestic  manufactures ; 
samples  of  goods  demanded  in  foreign  markets,  which 
might  be  made  in  Canada;  samples  of  goods  now  im- 
ported, which  might  be  made  in  Canada ;  and  samples 
of  all  raw  materials,  etc.,  illustrating  the  natural 
resources  of  that  country.  This  promised  develop- 
ment is  in  response  to  the  frequent  demands  for  a 
Canadian  institution  analogous  to  the  Commercial 
Museum  of  Philadelphia. 

Mention  should  also  be  made  of  the  work  of  the 
Economic  and  Development  Commission  which  is  in- 
terested in  the  extension  of  foreign  trade;  of  the 


34  FOREIGN  TRADE 

Dominions  Royal  Commission,  which  has  been  taking 
evidence  in  regard  to  natm'al  resources  and  condi- 
tions of  trade  in  Canada  and  thruout  the  Empire,  and 
which  will  probably  bring  results  of  great  value  by 
making  known  those  varied  resources  and  by  recom- 
mending the  removal  of  obstacles  or  hampering  re- 
strictions on  the  trade  of  the  Empire.  Of  interest 
also  is  the  recently  appointed  Advisory  Council  for 
Scientific  and  Industrial  Research,  which  will  seek  to 
apply  the  scientific  principles  of  technical  research  to 
the  industrial  and  commercial  problems  of  Canada. 
The  importance  of  this  last  body  cannot  be  exagger- 
ated, as  will  readily  be  recognized  by  a  reading  of  a 
list  of  the  larger  projects  it  has  already  in  hand — a 
comprehensive  industrial  census ;  the  training  and  util- 
ization in  industrial  establishments  of  "efficiency  ex- 
perts"; the  creation  of  technical  laboratories  under 
state  cooperation  at  the  great  industrial  centers  to 
give  free  help  to  manufacturers  in  solving  their  prob- 
lems; the  provision  of  scientific  research  scholarships 
and  the  commercial  utilization  of  by-products.  Can- 
ada cannot  afford  to  be  behind  any  nation  in  the  world 
in  efficiency  of  production  if  she  is  to  win  her  proper 
place  in  the  fierce  race  for  success  in  trade  which  is 
bound  to  follow  the  resmnption  of  normal  world  con- 
ditions. 

REVIEW 

"What  factors  have  shaped  Canada's  present  commercial  pol- 
icy? 

Account  for  the  attitude  of  the  typical  Canadian  manufacturer 
to  foreign  trade. 


CANADA'S  TRANSITIONAL  STAGE  35 

In  what  stage  of  economic  evolution  was  Canada  before  the 
war?  Account  for  the  recent  changes  in  trade  balance  and  esti- 
mate its  significance. 

How  have  Canada's  borrowings  affected  her  foreign  trade  in 
the  past?     Estimate  the  character  of  this  influence  in  the  future. 

What  lines  of  production  and  export  should  be  stimulated  in 
Canada .'' 

Enumerate  the  steps  which  have  so  far  been  taken  to  facilitate 
Canada's  export  trade. 


CHAPTER  III 

ELEMENTS  OF  FOREIGN  TRADE 

1.  Nature  of  world  trade. — It  is  easy  to  forget 
that  world-wide  trade  is  a  modern  phenomenon. 
Only  a  hundred  years  ago  the  overwhelming  majority 
of  people,  even  in  the  most  advanced  countries,  lived 
almost  exclusively  upon  domestic  products.  Foreign 
imports  were  chiefly  luxuries;  they  did  not  figure  in 
the  life  of  the  masses.  The  man  of  a  hundred  years 
ago  was  clothed  in  wool  that  had  never  crossed  the  sea ; 
his  house  was  built  of  stone  broken  from  a  nearby 
quarry,  or  of  timbers  hewn  in  the  neighboring  forests. 
His  food,  if  it  was  not  raised  on  his  own  farm  or  in  his 
own  vegetable  garden,  came  from  no  great  distance. 
All  this  has  changed. 

Now  the  French  workman  wears  garments  the  raw 
material  for  which  comes  from  the  cotton  fields  of 
Texas  or  Louisiana.  The  English  laborer  serves  Aus- 
tralian mutton  or  Argentine  beef  on  his  table.  The 
steel  of  his  knife  is  made  of  foreign  ore;  his  tea  was 
grown  under  the  sun  of  Ceylon;  his  bread  is  the 
product  of  Canadian  wheat. 

What  was  the  exception  fifty  years  ago  is  the  rule 
today.  The  very  necessities  of  life,  even  those  of  the 
poorest  classes,  are  brought  from  the  most  distant 

36 


ELEMENTS  OF  FOREIGN  TRADE  37 

corners  of  the  world.  A  man's  locality  used  to  be  his 
home,  his  som-ce  of  supplies  and  his  market.  It  is  so 
no  more.  The  change  has  been  brought  about  by  the 
utilization  of  the  great  inventions  which  have  revolu- 
tionized transportation. 

2.  Growth  of  world  trade. — In  1810  the  value  of  the 
combined  imports  and  exports  of  all  the  leading  coun- 
tries amounted  to  less  than  $5,000,000,000.  In  1910 
this  total  had  risen  to  almost  $33,000,000,000.  These 
figures  are  a  measure  of  the  change  in  the  world's 
international  commerce,  the  shifting  from  one  corner 
of  the  globe  to  another  of  huge  volumes  of  staple 
products  and  of  bulk  commodities.  Instead  of  the 
spices  of  India  and  the  rare  luxuries  of  China,  which 
filled  the  tiny  holds  of  early  sailing  vessels,  the  cargo 
of  a  steamer  today  consists  of  thousands  of  tons  of 
coal,  hundreds  of  thousands  of  bushels  of  wheat,  and 
trainloads  of  bananas. 

3.  Fundamental  causes  of  international  trade. — 
International  commerce  is  the  result  of  differences 
between  the  natural  resources  of  various  countries. 
Because  of  these  differences,  it  becomes  profitable,  and 
sometimes  necessary,  for  nations  to  exchange  their 
surpluses.  But  this  geographic  phenomenon  is  largely 
influenced  by  two  important  factors — the  racial  char- 
acteristics of  peoples,  and  the  respective  stages  of  their 
economic  development. 

Racial  differences  are  largely  the  result  of  climatic 
conditions.  Along  the  lines  of  the  various  zones  of 
latitude,  the  human  race  is  divided  into  classes  of 


38  FOREIGN  TRADE 

peoples,  industrious  and  non-industrious,  intelligent 
and  dull,  enterprising  and  backward.  Moreover, 
among  different  nations  that  are  in  the  same  latitude 
and  subject  to  the  same  climatic  conditions,  we  find  ra- 
cial differences  which  are  due  to  historical,  geological 
and  other  causes,  differences  which  strongly  affect  the 
development  of  their  economic  life.  Thus,  the  French 
show  extraordinaiy  skill  and  taste  in  art ;  the  Germans 
are  known  for  their  painstaking  thoroness,  for  their 
scientific  skill  and  for  their  thrift ;  and  the  Americans 
set  an  example  in  resourcefulness  and  keen  enterprise. 

Racial  differences  tend  to  be  eliminated,  however,  as 
the  various  nations  are  thrown  into  the  great  melting 
pot  of  international  trade  and  commerce.  The 
struggle  for  the  world's  markets  forces  each  to  adopt 
the  virtues  and  achievements  of  its  rivals;  each  tries 
to  learn  from  the  others,  and  is  anxious  to  adopt  what- 
ever customs  and  methods  have  proved  conducive  to 
success. 

4.  Differences  in  the  stage  of  economic  develoj)- 
ment. — The  effort  to  forge  ahead  causes  a  constant 
shifting  in  rank  among  the  nations  of  the  world,  and 
the  more  gifted  nations  come  to  the  top.  This  evolu- 
tion radically  affects  international  trade.  There  is  a 
general  tendency  toward  emancipation  from  foreign 
industrial  supremacy.  Once  England  was  the  work- 
shop of  the  world,  but  one  nation  after  another,  by 
means  of  fiscal  measures  and  definite  national  policies, 
has  freed  itself  from  dependence  upon  British  indus- 
tries.    Germany,   France,   the   United    States,   and 


ELEMENTS  OF  FOREIGN  TRADE  39 

Japan,  have  become  industrial  nations,  and  even 
young  countries  like  Canada  and  Australia  have  made 
great  sacrifices  to  build  up  national  industries. 

Under  the  leadership  of  England,  economic  writers 
formerly  saw  an  ideal  solution  of  international  rela- 
tions in  the  policy  of  free  trade,  which  meant,  to  them, 
the  division  of  the  world  into  agricultural  and  indus- 
trial nations  exchanging  their  surpluses  for  mutual 
benefit.  But  since  the  middle  of  the  nineteenth 
century  a  very  different  idea,  of  which  the  chief  advo- 
cates are  the  United  States  and  Germany,  has  been 
gaining  ground — namely,  the  idea  that  the  welfare  of 
a  nation  is  best  promoted  by  the  largest  possible 
development  of  all  its  national  resources,  irrespective 
of  the  fact  that,  in  the  beginning  at  least,  it  would  be 
cheaper  to  purchase  most  manufactured  articles 
abroad.  As  this  viewpoint  came  to  be  widely  ac- 
cepted, it  was  reflected  in  the  fiscal  policies  of  most  of 
the  commercial  nations  of  the  world  which,  with  the 
exception  of  Great  Britain,  abandoned  the  old  free- 
trade  principles  and  constructed  tariff  walls  around 
their  respective  territories,  in  order  that,  so  protected, 
they  might  be  able  to  develop  their  natural  resources  to 
the  largest  possible  extent.  This  tendency  toward 
protectionism  has  lessened  the  importance  exerted  by 
the  influence  of  international  differences  in  economic 
development,  since,  when  protection  is  practised,  these 
differences  tend  to  be  eliminated. 

5.  Differences  in  natural  resources. — The  effect 
upon  international  commerce  of  international  differ- 


40  FOREIGN  TRADE 

ences  in  economic  development  and  in  racial  character- 
istics is  less  now  than  formerly.  Therefore,  the 
importance  of  the  fundamental  basis  of  international 
trade — differences  in  natural  resources — increases. 
This  factor  really  includes  more  than  the  existence  of 
natural  resources ;  it  includes  also  those  conditions  that 
make  the  resources  accessible  and  useful  to  man — such, 
for  example,  as  topography,  humidity  and  dryness, 
temperature,  and  proximity  to  navigable  streams  or  to 
tidewater.  The  coal  fields  of  China  are  dormant 
treasures,  useless  until  railroads  are  built  by  means  of 
which  the  coal  may  be  brought  to  the  seashore.  The 
minette  ore  of  Luxemburg  and  Lorraine  was  of  little 
value  until  the  inventions  of  Thomas  and  Gilchrist 
made  the  process  of  converting  this  ore  into  iron  and 
steel  a  profitable  one.  The  valley  of  the  Nile  multi- 
phed  many  times  in  value  when  the  Assuan  Dam 
insured  for  it  the  necessary  irrigation  and  freedom 
from  the  devastation  of  floods.  The  soil  of  Mesopo- 
tamia, perhaps  the  richest  in  the  world,  is  buried  under 
desert  sand,  awaiting  the  day  when  modern  engineer- 
ing shall  restore  the  irrigation  which  Nature  has  with- 
drawn. 

6.  Effect  of  natural  resources  on  the  trend  of  world 
trade. — The  differences  between  the  natural  resources 
of  various  countries  will  be  the  decisive  influence  in  the 
future  development  of  international  trade,  and  will 
sooner  or  later  effect  a  change  in  the  trend  of  foreign 
commerce.  Today,  the  trend  follows  the  parallels  of 
latitude;  that  is  to  say,  it  runs  from  east  to  west  and 


ELEMENTS  OF  FOREIGN  TRADE  41 

not  from  north  to  south.  This  is  because  today 
foreign  trade  is  still  largely  the  result  of  differences 
between  the  stages  of  development  of  various  countries 
and  continents  in  the  Temperate  Zone.  But  the  more 
the  process  of  leveling  and  assimilation  proceeds,  the 
more  prominent  will  become  the  differences  in  natural 
resources  and  climatic  conditions.  These  natural 
elements  tend  to  influence  trade  to  move  between  dif- 
ferent zones — that  is,  north  and  south.  Long  after 
we  have  ceased  shipping  wheat  to  Liverpool  and  Rot- 
terdam, we  shall  still  be  getting  coffee  from  Brazil, 
hides  from  Argentina,  sugar  from  Cuba,  and  wool 
from  South  Africa.  The  quantity  of  this  country's 
imports  from  Europe  has  not  grown  so  rapidly  during 
the  last  fifty  years  as  the  imports  of  tropical  products, 
like  cocoa,  coffee,  fibers,  rubber,  indigo,  ivory,  olive  oil, 
rice,  sugar,  tea  and  tobacco.  This  increase  of  imports 
from  the  tropics  will  be  observed  in  connection  wdth 
the  most  important  branches  of  world  trade  now  to 
be  described. 

7.  International  coal  trade. — The  shipping  world 
judges  the  importance  of  commodities  by  the  amount 
or  number  transported.  According  to  this  standard, 
coal  heads  the  line  of  the  world's  staple  commodities. 
We  live  in  an  age  of  coal  and  iron  and,  of  the  two, 
coal  is  the  more  voluminous  and  is  scattered  more  pro- 
fusely over  the  earth.  Great  Britain  has  had,  and  now 
has,  by  far  the  largest  share  of  the  world's  coal  trade. 
The  proximity  of  British  coal  deposits  to  suitable 
harbors  early  indicated  to  the  British  coal-producer 


42  FOREIGN  TRADE 

the  opportunity  of  widening  his  market.  An 
anonymous  writer  of  the  fifteenth  century  tells  us  that 
even  then  the  exportation  of  coal  was  the  main  cause 
of  the  British  merchant  fleet's  existence,  and  that  all 
other  trades  were  to  be  considered  as  merely  branches 
of  this  trunk.  The  quality  of  British  coal  is  such 
that  a  ready  foreign  market  for  it  is  assured.  It  looks 
as  if  foresight  on  the  part  of  Nature  were  responsible 
for  the  fact  that  the  coal  produced  in  the  Newcastle 
region,  which  lies  nearest  the  Continent  of  Europe,  is 
most  suitable  for  use  in  inland  industries  and  for 
household  purposes,  as  well  as  for  the  making  of  gas ; 
while  the  coal  of  South  Wales,  which  is  situated  on 
the  trade  routes  between  England  and  the  oversea 
world,  is  particularly  suitable  for  marine  use.  It  is 
this  coal  of  South  Wales  which  is  distributed  to  the 
numerous  coaling  stations  that  Great  Britain  main- 
tains at  strategic  points  in  all  seas. 

8.  Extent  and  significance  of  British  export  coal 
trade. — It  is  not  generally  realized  what  an  enormous 
export  coal  trade  Great  Britain  carries  on,  or  what 
its  value  is  to  the  entire  economic  life  of  the  United 
Kingdom.  In  addition  to  the  30  or  40  million  tons  of 
coal,  that  annually  leave  the  British  Isles  in  the  bunker 
holds  of  outgoing  vessels,  Great  Britain  in  normal 
times  exports  over  60,000,000  tons  of  coal  every  year. 
In  normal  times  the  world's  annual  exports  of  wheat 
and  flour  amount  to  about  715,000,000  bushels,  or  less 
than  25,000,000  tons.  The  value  of  the  British  coal 
export  trade  lies  less  in  its  importance  as  a  source  of 


ELEMENTS  OF  FOREIGN  TRADE  43 

revenue  than  in  its  utility  as  a  return  cargo  to  be 
balanced  against  the  millions  of  tons  of  raw  materials 
that  converge  upon  northwestern  Europe.  A  later 
chapter  will  deal  with  this  aspect  of  the  question  and 
will  also  discuss  the  question  of  developing  American 
coal  exports. 

9.  German  foreign  trade  in  coal. — Of  late  years 
Germany  also  has  systematically  developed  her  coal- 
export  trade.  She  has  done  this  in  accordance  with 
the  far-reaching  policy  of  the  Rheinish-Westphalian 
Coal  Syndicate  which,  thru  the  port  of  Rotterdam, 
now  reaches  such  distant  ports  as  Buenos  Ayres  and 
Rio  de  Janeiro.  The  considerations  that  suggested 
this  pohcy  were  simple.  It  seemed  advisable  for 
Germany  to  develop  a  coal  trade  that  would  enable 
her  to  be  independent  of  the  British  supply  of  bunker 
coal.  Then,  too,  it  was  hoped  that  the  price  of  Argen- 
tine wheat  could  be  reduced,  by  giving  the  vessels  that 
transported  it  to  Germany,  a  return  cargo  from  Ger- 
many. But  the  German  export  coal  trade  is  small 
compared  to  the  British,  and  is  nearly  equalled  by  the 
importation  of  British  coal  via  Hamburg. 

10.  World-wide  distribution  of  British  coal. — 
British  coal  has  a  market  in  nearly  every  part  of  the 
world,  tho  some  of  the  foreign  markets  have  been  con- 
tested by  foreign  products.  Japanese  and  Australian 
coal  is  now  competing  with  the  British  product  in  the 
Indian  market.  The  bulk  of  British  coal  exports  goes 
to  the  Continent  of  Europe,  especially  to  the  regions 
entirely  dependent  on  foreign  coal,  like  Norway  and 


44.  FOREIGN  TRADE 

Sweden,  Italy  and  Spain,  Switzerland  and  Greece. 
Even  France  is  unable  to  supply  its  demand  of  coal 
from  its  own  resources. 

11.  Future  of  the  coal  trade. — It  is  impossible  to 
predict  the  future  of  the  world's  coal  trade,  since  one 
cannot  foresee  at  this  time  to  what  extent  the  present 
situation  will  be  changed  by  discoveries  of  new  coal 
deposits  in  regions  like  South  America  and  China. 
Then,  too,  the  increasing  utility  of  oil  as  a  marine  fuel 
may,  in  time,  entirely  change  the  present  situation  of 
the  coal  trade.  So,  also,  may  the  development  of 
water  power.  Within  a  calculable  time  there  wiU  be 
an  exhaustion  of  certain  coal  fields,  and  the  result  may 
be  a  complete  shifting  of  the  source  of  coal  exports. 

12.  Iron  ore. — Along  with  coal,  iron  ore  is  the 
foundation  of  our  present  industrial  civilization.  Be- 
cause of  the  small  amount  of  iron  ore  deposits  in  some 
of  the  countries  of  the  world,  it  is  necessary  for  others 
to  ship  great  quantities  over  the  seas.  While  the  iron 
and  steel  industries  are  largely  concentrated  in  the 
most  highly  developed  nations,  ore  is  found  in  many 
backward  countries  like  Cuba,  Brazil,  Northern 
Africa  and  China,  countries  which  have  not  yet 
reached  the  stage  necessary  for  the  development  of 
iron  and  steel  manufacture.  British  iron  masters 
depend  largely  on  the  iron  ore  brought  from  Bilboa, 
Spain,  and  have  now  under  consideration  the  importa- 
tion of  Chilean  ores.  The  Bethlehem  Steel  Corpora- 
tion has  already  arranged  to  import  ore  from  Chile. 
Brazil  is  getting  ready  to  make  large  exports  of  iron 


ELEMENTS  OF  FOREIGN  TRADE  45 

ore  thru  Victoria.  The  United  States  Steel  Cor- 
poration has  bought  the  famous  iron  mountain  of 
Durango,  Mexico,  estimated  to  contain  300,000,000 
tons  of  iron.  The  necessity  of  mixing  various  quali- 
ties of  ore  in  order  to  produce  a  desired  quality  of  steel, 
makes  the  importation  of  iron  ore  necessary  even  in 
countries  which  themselves  produce  large  quantities. 

13.  International  grain  trade. — Grain  which  is 
raised  in  all  parts  of  the  world  occupies  the  second 
most  important  position  in  foreign  trade.  Of  the 
world's  total  grain  crop,  only  a  relatively  small  portion 
is  brought  to  tidewater  and  shipped  from  one  land  to 
the  other.  It  is  a  very  essential  staple  product,  and 
is  generally  raised  to  be  consumed  by  those  who  grow 
it,  and  by  their  immediate  neighbors.  It  has  come  to 
figure  in  international  trade  only  as  a  result  of  our 
super-civilization — its  crowded  cities  and  deserted 
fields.  For  always,  as  the  industrialization  of  a  coun- 
try proceeds,  its  land  becomes  too  valuable  for  agri- 
cultural production  in  competition  with  the  cheap  land 
of  colonies  or  new  countries,  which  specialize  in  pro- 
ducing foodstuffs  and  raw  materials,  and  sell  in 
exchange  for  the  manufactures  of  the  industrial 
nations. 

So  we  find  that  today  over  one-tenth  of  all  the 
cereals  are  bought  and  sold  in  international  commerce. 
More  of  wheat  and  barley  than  of  the  other  cereals  is 
produced  for  oversea  consumption.  The  following  ta- 
bles show:  (1)  the  world's  production  of  the  most  im- 
portant cereals  in  the  year  1913,  and  the  exportation. 


^6 


FOREIGN  TRADE 


in  millions  of  bushels;  and  (2)  the  average  exports  of 
wheat,  corn  and  oats  from  the  principal  surplus- 
producing  countries  for  the  years  1911, 1912  and  1913. 

WORLD'S  PRODUCTION  AND  EXPORTATION  OF  LEADING 

CEREALS 


Cereal 

Production 

Exports 

Per  Cent 

Lbs. 

Exports  in 

exported 

per 
Bushel 

mill,  tons 

at  2,240  lbs. 

a  ton 

Wheat 

4,127.4 

858.4 

20.5 

60 

22.9 

Corn 

3,587.4 

343.8 

9.5 

56 

8.6 

Oats 

4,697.4 

233.7 

4.9 

32 

3.3 

Barley 

1,650.3 

309.31 

18.7 

48 

6.6 

Rye 

1,880.4 

114.4 

6.1 

56 

2.8 

Total 

15,942.9 

1,859.6 

11.6 

44.2 

1  Barley  exports  also  include  malt  reduced  to  terms  of  barley. 

AVERAGE  EXPORTS  OF  CORN,  WHEAT,  OATS   AND   FLAX- 
SEED   OF    THE    PRINCIPAL    SURPLUS-PRODUCING 
COUNTRIES  DURING  1911,   1912   AND   1913 


Cora, 

Wheat 

Oats 

.Flaxseed 

Coim.lri.€S. 

Million 
bushels 

Per 

cent 
of 
total 

Million 
bushel^ 

Per 

cent 

oi 

total 

Jlillion 
bushels 

Per 

cent 

of, 

total 

MilUon 
bushels 

Per 

cenfa 

of 

total 

Arpfintina 

189,8 
52, 

47.r 

36.3 

J2.2 

4.6 

;3.8 

fet.9 
J5.4 
J3.9 
1.0.2 
3.5 
1.3 
.8 

101, 

54. 

115.8 

127.4 

12.5 

111. 

B9.6 

52.3 

6.7 

15.8 

8.4 
18.1 
19.9 

1.9 

17.3 
9.3 
8.2 
1.1 

52.8 
10. 

65.2 
16.6 

2.5 

33. 
6.3 
7.9 

40.8 

10.4 
1.6 

24.5 
5.7 

4.8 
17.2 

46.9 

RniimaT»if( 

rTn1f,R(i  Rtfltfia 

TiiiRsin 

11. 

Riilga.ria. 

Sfirvia 

"Rritish  So.  Afrina 

91 

Rritish  Tndift 

33 

Aiist.rnliil 

Austria  Hungary,^ 
Chile,  Servia          j 

nhiift 

ELEMENTS  OF  FOREIGN  TRADE  47 

The  United  States  is  becoming  industrialized  so 
rapidly  that  it  must  look  upon  the  exportation  of  its 
cereals  as  only  a  temporary  and  transitory  part  of  its 
development.  Nevertheless,  today  the  exportation 
of  cereals  plays  an  important  part  in  our  trade, 
whether  it  be  measured  by  value  or  by  weight. 

14.  The  wheat  trade. — The  cereal  which  plays  the 
most  important  part  in  international  commerce  is 
wheat.  The  greatest  wheat-exporting  countries  are 
Russia,  the  Argentine  Republic,  the  United  States, 
Roumania  and  Canada.  In  1870  Russia  exported 
about  62,000,000  bushels,  the  United  States  had 
increased  her  export  to  almost  170,000,000  bushels, 
while  that  of  Russia  had  decreased  to  barely 
40,000,000  bushels.  Later,  the  Russian  exportation 
of  wheat  increased  rapidly — excepting  for  a  slump 
about  1900— to  a  maximum  of  over  225,000,000 
bushels  per  year,  while  that  of  the  United  States  suf- 
fered a  decline,  especially  noticeable  in  1900,  until, 
in  1910,  our  export  had  been  reduced  to  60,000,000 
bushels.  The  Canadian  wheat  exports  grew  slowly 
until  about  1895.  From  that  time  on  there  was  a 
steady  increase,  from  about  9,000,000  bushels,  to 
158,000,000  in  1916,  or  an  average  of  117,000,000  in 
the  last  three  years.  The  Argentine  grain  export 
trade  developed  more  rapidly.  In  spite  of  very  mod- 
est beginnings,  its  exports  of  wheat  amounted  to  more 
than  100,000,000  bushels  in  1913.  In  the  same  year 
the  Roumanian  wheat  exports  exceeded  those  both  of 

XV— 5 


48  FOREIGN  TRADE 

the  United  States  and  of  Canada,  but  since  then  a  drop 
has  occurred.  Manchuria,  whose  port  is  Vladivo- 
stock,  promises  to  become  an  important  wheat-export- 
ing country. 

There  are  other  countries  that  export  wheat,  such 
as  British  India  and  Australia,  but,  owing  to  climatic 
conditions,  the  wheat  exports  of  those  countries 
fluctuate  to  such  an  extent  that  they  have  not  yet 
gained  an  important  position  in  the  world's  wheat 
trade. 

The  following  table  shows  the  wheat  trade  and 
wheat  production  of  the  world's  most  important 
wheat-exporting  countries  during  the  last  peace  year 
(1913): 

WHEAT  PRODUCTION  AND  TRADE  OF  THE  LEADING 
WHEAT  IMPORTING  AND  EXPORTING 
COUNTRIES 

WHEAT  AND  FLOUR  i 

Importing  Countries               Million  Bushels  Yield  per  acre 

Crop  1913  Imports  1913              in  bu.  1910 

Belgium     14.8  69.8                         •       40.0 

Brazil     24.7 

Brit.  So.  Africa 9.4 

Denmark     6.7  8.9                                37.8 

France     321.0  57.7                               21.8 

Germany   171.1  94.5                                30.5 

Greece    7.0  7.0 

Italy     214.4.  66.6                                16.3 

Japan     26.9  7.1                               20.8 

Netherlands    5.2  89.5 

Portugal    9.2  6.4 

Spain    112.4  6.4 

Sweden    9.3  7.8 

Switzerland    3.5  21.4                                34.2 

United   Kingdom    ...         58.4  227.0                                34.3 

Other  countries    71.8 

I 


ELEMENTS  OF  FOREIGN  TRADE  49 

WHEAT  AND  FLOUR  i 

ExPOKTixG  CouxTBiES           Million  Bushels                       Yield  per  acre 

Crop  1913  Exports  1913               in  bu.  1913 

Argentina    187.4  109.6 

Australia   94.9  53.2 

Austria-Hungary   232.2  1.7                             19.9 

Belgium 14.8  16.0 

British  India 362.7  54.7                           10.9 

Bulgaria 51.3  11.5                            12.4 

Canada 231.7  152.0                           21.5 

Chile 23.6  2.2 

Germany   171.1  29.6                            35.1 

Netherlands 5.2  64.5                             

Roumania 83 . 2  54 . 2                             .... 

Russia 838.0  130.6                           13.5 

Serbia 10.5  3.7 

United  States 763 . 4  154 . 8                            15.2 

Other  countries 20 . 2                             .... 

1  Flour  is  reduced  to  terms  of  grain,  where  included  in  these  columns, 

by    assuming    one   barrel    of   flour  to    be    the   product   of   43^    bushels    of 
wheat. 


15.  Intensive  and  extensive  wheat  production. — > 
The  table  just  given  reveals  the  great  difference  in  the 
yield  per  acre  between  the  various  wheat-producing 
countries.  It  also  clearly  shows  the  difference  be- 
tween the  methods  of  agricultural  production  used  in 
old  and  new  countries  respectively — in  other  words, 
the  difference  between  intensive  and  extensive  agricul- 
ture. To  some  extent,  also,  the  difference  in  the 
quality  of  soil  enters  into  the  question.  Thus  the  30.5 
bushels  per  acre  raised  in  Germany  in  1909  were 
probably  the  result  of  more  intensive  and  more  scien- 
tific farming  than  the  34.3  bushels  raised  on  the  acres 
of  the  United  Kingdom  in  the  same  year.  The  sandy 
soil  of  Germany  needs  a  more  careful  treatment  than 
the  more  fertile  land  of  the  British  Isles. 


50 


FOREIGN  TRADE 


16.  Seasonal  character  of  the  wheat  trade. — One  of 
the  most  important  facts  of  the  wheat  trade,  from  the 
standpoint  of  shipping,  is  that  the  harvest  occurs  at 
various  periods  in  the  year  in  different  parts  of  the 
world.  In  this  respect,  the  southern  hemisphere 
complements  the  northern  hemisphere.  The  seasonal 
difference  in  wheat  production  makes  it  possible  to 
employ  efficiently  the  shipping  tonnage  engaged  in 
carrying  to  European  markets  the  surplus  wheat 
crops  of  the  Argentine,  the  United  States,  Canada 
and  Australia. 


Dates 
January 

February 

March 

April 

May 
June 


July 


August 


September 
October 
November 
December 


OF  Wheat  Harvest  in  Various  Countries 

Australia,  New  Zealand,  Argentine  Republic, 
Chile. 

India. 

India,  Upper  Egypt. 

Mexico,  Cuba,  Lower  Egypt,  Syria,  Persia, 
Asia  Minor. 

Morocco,  Algeria  and  Tunis ;  the  northern 
parts  of  Asia  Minor,  China,  Japan,  Texas, 
Florida. 

The  Mediterranean  Peninsulas  and  the  South 
of  France,  California,  Oregon,  Utah  and  the 
greater  part  of  central  and  eastern  United 
States  territory  south  of  40° ;  Afghanistan, 
Japan. 

France,  Austria-Hungary,  southern  Russia, 
Roumania,  the  northern  parts  of  the  United 
States,  Ontario  and  Quebec. 

England,  Belgium,  the  Netherlands  and  Ger- 
many; the  eastern  parts  of  the  Dominion  of 
Canada. 

Scotland,  Sweden,  Norway  and  Russia. 

Finland,  Northern  Russia. 

Peru,  South  Africa. 

Burma,  South  Australia. 


ELEMENTS  OF  FOREIGN  TRADE  51 

The  foregoing  table  shows  the  months  during  which 
the  wheat  harvest  is  at  its  height  in  various  parts  of 
the  world.  It  shows  that  at  any  time  of  the  year  a 
cargo  of  wheat  can  be  obtained  somewhere  by  a  vessel 
seeking  to  carry  it. 

17.  Corn  crop. — The  most  important  crop  of  this 
country  is  the  corn  crop.  It  is  the  only  grain  that 
the  old  world  owes  to  the  new.  Corn  was  extensively 
cultivated  by  the  American  Indian  before  the  dis- 
covery of  this  country  by  Columbus.  It  is  a  very, 
productive  crop  and,  as  a  rule,  yields  twice  as  much 
grain  to  the  acre  as  wheat.  The  cultivation  has  spread 
rapidly  in  many  parts  of  the  tropical  zone  and  in  the 
warmer  regions  of  the  temperate  zone. 

During  the  year  1913,  the  world's  corn  crop 
amounted  to  3,587,400,000  bushels,  of  which  the 
United  States  produced  almost  two-thirds,  2,446,- 
988,000.  (In  1915  this  country  produced  3,054,535,- 
000. )  The  remainder  was  distributed  largely  among 
jMexico,  Argentina  and  the  countries  of  the  Danube 
Valley.  Altho  Argentina  has  only  recently  begun  to 
grow  corn,  it  at  present  exports  a  larger  amount  than 
the  United  States.  This  fact  is  shown  by  the  table 
already  given,  on  page  46. 

18.  Other  cereals  and  starch  foods. — As  the  fol- 
lowing table  will  show,  Russia  is  the  largest  j^roducer 
of  barley. 

Barley,  which  enters  into  international  commerce 
only  to  a  very  limited  extent,  is  used  in  brewing  and 
as  a  forage  crop  where  corn  cannot  be  grown.     It  is 


52 


FOREIGN  TRADE 


grown  extensively  in  Russia,  since  corn  does  not  thrive 
there  as  it  does  in  this  country. 


PRODUCT  OF  BARLEY  IN  LEADING 
PRODUCING  COUNTRIES 

(Million  bushels) 


Cotintry 

1913 

1914 

1915 

Russia  in  Europe 

557.6 

398.1 

475.1 

United  States 

178.2 

195.0 

237.0 

German  Empire 

168.7 

144.1 

1.50.0 

Austria-Hungary 

162.6 

145.2 

136.2 

Japan 

101.6 

85.8 

93.4 

United  Kingdom 

67.8 

66.3 

48.7 

Canada 

48.3 

36.2 

50.9 

France 

46.1 

44.8 

36.2 

India 

41.0 

33.3 

40.0 

In  some  parts  of  Asia  rice  is  the  main  crop,  and  it 
constitutes  the  principal  means  of  subsistence  in 
China  and  Japan,  India,  Indo-China  and  the  East 
Indian  Islands.  There,  both  the  humid  air  and  the 
wet  soil  facilitate  its  production.  But  because  rice 
is  not  moved  from  one  country  to  another,  like  wheat, 
its  significance  in  international  trade  is  small. 

The  same  is  true  of  the  potato,  which  possesses  a 
very  important  food  value,  but  which  figures  little  in 
over-sea  commerce.  The  potato  is  a  starch  food. 
There  is  only  one  food  of  this  class  that  plays  an  im- 
portant part  in  international  trade — the  banana.  This 
fruit  was  for  a  long  time  exported  almost  exclusively 
from  the  Canary  Islands  to  Great  Britain.  The  de- 
velopment of  the  West  Indies,  largely  thru  the  enter- 
prise of  the  United  Fruit  Company,  has  opened  a 
new  source  of  supply  for  the  banana.  Improved 
shipping  service  and  the  j)erfection  of  refrigerator 


ELEMENTS  OF  FOREIGN  TRADE  53 

facilities  in  transportation  on  land  and  sea  have 
made  it  a  staple  of  both  American  and  west  European 
diet.  A  product  which  has  recently  gained  consider- 
able importance  in  connection  with  the  development 
of  international  trade  is  the  soy-bean.  This  product 
from  Manchuria  appeared  for  the  first  time  in  Euro- 
pean markets  in  1908,  but  it  became  popular  so 
rapidly  that,  in  the  following  year,  440,000  tons  of 
soy-beans  were  shipped  thru  the  Suez  Canal.  The 
bean  cake  is  of  great  value  as  cattle  food,  and  the  oil 
of  the  bean  is  used  in  the  manufacture  of  soap. 

19.  Cotton  trade. — Next  to  the  corn  crop,  the  cot- 
ton crop  is  by  far  the  most  important  product  of 
the  American  soil.  Cotton  is  a  raw  material  which, 
altho  it  is  produced  in  few  regions,  is  used  everywhere. 
Consequently,  a  great  amount  of  cotton  is  transported 
from  one  part  of  the  world  to  another.  The  United 
States  is  by  far  the  most  important  producer  of  cotton 
in  the  world.  Its  output  represents  almost  60  per 
cent  of  the  world's  production.  The  following  table 
shows  the  world's  cotton  production  in  the  three  years 
1912,  1913  and  1914  of  those  countries  that  produce 
more  than  1,000,000  bales  annually: 

Country  Million  bales  at    478  pounds  a  bale  net 


1912 

1913 

1914 

United  States 

13.7 

14.2 

16.1 

British  India 

2.8 

3.9 

4.3 

Egypt 

1.6 

1.6 

1.5 

Asiatic  Russia 

1.0 

1.1 

1.2 

Almost  all  the  most  important  cotton-consuming 


54  FOREIGN  TRADE 

countries  have  tried  to  reduce  their  dependence  upon 
American  cotton.  The  British  Cotton  Growers'  Asso- 
ciation, the  Association  Cottoniere  Coloniale  and  other 
organizations  were  created  for  this  very  purpose. 
Russia,  also,  has  made  strenuous  efforts  to  develop 
the  cultivation  of  cotton  within  its  boundaries. 

The  largest  consumer  of  cotton  is  the  United 
States.  Great  Britain  follows  far  behind.  The  dis- 
tribution of  cotton  consumption  among  different 
countries  of  the  world  is  indicated  by  the  following 
table : 


WORLDS  CONSUMPTION  OF  COTTON 

Season  of  1914-15 

Country 

Bales  of 
500  lbs.  net 

Total 

19,761,000 

United  States 

5,429,000 

United  Kingdom. 

3,890,000 

Other  European  Countries 

6,250,000 

India 

1,007,000 

Japan 

1,400,000 

Canada 

185,000 

All  others 

1,000,000 

The  fact  that  the  United  States  produces  over  60 
per  cent  of  the  world's  cotton  crop  might  lead  some  to 
think  that  this  country  is  also  the  greatest  exporter  of 
cotton  goods.  This  is  not  the  case,  altho  it  is  true  that 
our  cotton  spinning  industry  has  grown  rapidly. 
The  number  of  spindles  increased  from  less  than  four 
million  in  1880,  to  31.5  million  in  1913,  and  the  value 
of  the  product  grew  from  $61,869,000,  in  1860,  to 
$628,392,000  in  1913. 


ELEMENTS  OF  FOREIGN  TRADE 


55 


ACTIVE  COTTON 

SPINDLES 

Area 

1914 

1900 

United  States 

32,107.000 

19,472,000 

Cotton-growing  states 

12,711.000 

4,368.000 

^11  othe 

r states 

19,396,000 

15,104.000 

United  Kingdom 

56,300.000 

45,500.000 

German  ^Empire 

11,550.000 

8,000.000 

Russia 

9,160.000 

7,500,000 

France 

7,416.000 

5,500.000 

Austria-Hungary 

4,970,000 

3,300.000 

Italy- 

4,620.000 

1,940,000 

Spain 

2,210,000 

2,615.000 

India 

6,500,000 

6,945,000 

Japan 

1 

2,750.000 

1,274,000 

But  the  exportation  of  cotton  goods  grew  slowly — 
more  slowly  than  that  of  most  of  our  manufactured 
exports.  The  latter  increased  150  per  cent  in 
thirteen  years,  but  cotton  goods  increased  to  only  125 
per  cent.  Even  during  the  European  war,  we  have 
been  so  busy  manufacturing  war  supplies  that  we  have 
neglected  to  develop  our  cotton  goods  exports.  It  is 
Great  Britain  that  has  absorbed  most  of  Germany's 
suspended  export  trade  in  cotton  goods. 

20.  Tobacco  trade. — Tobacco  is  of  many  varieties 
and  gi'ows  in  almost  every  part  of  the  world.  It  is 
the  "money  crop"  of  wide  areas,  such  as  Kentucky 
and  Virginia,  where  the  farmer  depends  upon  the  sale 
of  tobacco  for  his  profit,  and  raises  other  farm  pro- 
ducts mainly  for  the  purpose  of  sustaining  himself  and 
his  family.  The  annual  output  of  the  United  States 
passed  a  billion  pounds  in  1914.  This  figure  repre- 
sented considerably  more  than  one-third  of  the  world's 


56  FOREIGN  TRADE 

total  production  of  2,600,000,000  pounds  at  that  time. 
India  is  the  country  next  in  importance.  All  other 
countries  that  raise  any  considerable  quantities  of 
tobacco,  such  as  Russia  and  Austria-Hungary,  fall 
far  below  the  leaders  as  regards  production. 

21.  Iiiternational  sugar  trade. — Sugar  is  a  com- 
modity which  not  only  is  of  great  importance  in  the 
life  of  a  nation,  but  which  also  plays  a  significant  part 
in  international  trade.  There  are  two  main  sources 
from  which  it  is  obtained,  the  sugar  beet  and  the  sugar 
cane.  These  two  sources  have  long  been  of  practically 
equal  importance,  but  of  late  it  seems  that  cane  is  as- 
suming the  greater  significance.  In  1913-1914  the 
world  produced  only  8,430,145,000  pounds  of  beet 
sugar  as  compared  with  11,225,000,000  pounds  of 
cane  sugar.  Sugar  cane  is  found  thruout  the  tropic 
world,  where  it  serves  as  a  staple  food  for  the  natives. 
Sugar-beet  culture  owes  its  existence  largely  to 
scientific  research,  which  was  first  stimulated  in  this 
connection  by  Napoleon.  He  wished  to  become  inde- 
pendent of  the  cane-sugar  supply,  controlled  by  Eng- 
land, which  owned  tropical  colonies  and  controlled  the 
seas.  The  process  of  extracting  sugar  from  the  sugar 
beet  has  been  rapidly  improved  during  the  last  cen- 
tury, especially  in  Germany,  which  is  by  far  the  most 
important  producer  of  beet  sugar.  Russia  and  Aus- 
tria follow  far  behind,  with  only  one-half  of  Ger- 
many's production.  Altho  the  United  States  has 
given  much  attention  to  the  development  of  its  beet- 


ELEMENTS  OF  FOREIGN  TRADE  57 

sugar  industry,  the  home  crop  is  far  from  adequate 
to  supply  the  demand  that  exists. 

The  tables  given  below  show,  in  pounds,  the  im- 
portation of  sugar  by  the  leading  sugar-consuming 
countries,  in  1913,  the  last  peace  year,  and  the  exports 
for  the  same  year  of  the  chief  sugar-producing  coun- 
tries : 

SUGAR    EXPORTS 1913 

United  States    4,762,014,000 

United  Kingdom 3,872,309,000 

British  India 1,922,009,000 

China    948,230,000 

Japan     725,067,000 

Canada  • 670,234,000 

Turkey 445,111,000 

Switzerland    258,513,000 

France   253,435,000 

SUGAR    IMPORTS 1913 

Cuba .5,476,901,000 

Dutch  East  Indies    2,823,310,000 

Germany    2,462,020,000 

Austria-Hungary    2,368,765,000 

(No  other  country  exported  more  than  half  a  million 
pounds.) 

22.  Brussels  Conventions.— The  competition  of  the 
European  sugar  with  tropical  cane  sugar  caused  no 
little  embarrassment  to  England  in  the  latter  part 
of  the  last  century.  On  the  one  hand,  England 
wished  to  secure  the  cheapest  sugar  possible  for  its 
consumption  and  for  its  industrial  use;  on  the  other 


58  FOREIGN  TRADE 

hand,  it  had  to  guard  the  interests  of  its  colonies  that 
produced  cane  sugar,  especially  Jamaica  and  Guiana. 
Government  bounties  stimulated  the  exportation  of 
beet  sugar  from  Germany,  France,  Russia,  Austro- 
Hungaiy,  Holland  and  Belgium.  Moreover,  Euro- 
pean refiners,  protected  in  their  home  market  by  cus- 
toms tariffs,  dumped  their  products  abroad,  and  these 
competed  so  strongly  with  Colonial  sugar  on  the  Eng- 
lish market,  and  caused  such  a  depression  in  the  sugar- 
producing  colonies,  that  England  decided  to  interfere. 
Then,  in  order  to  forestall  British  retaliation,  the 
various  governments  of  the  countries  exporting  beet 
sugar  met  with  representatives  of  Great  Britain  at  the 
so-called  Brussels  Conventions  of  1901-02,  which 
provided  for  abolition  of  the  bounties,  and  placed  the 
sugar  trade  of  the  world  once  more  on  a  sound  basis. 

23.  Coffee. — By  far  the  most  important  coffee- 
producing  country  is  Brazil.  Formerly  Ceylon  and 
other  East  Indian  territories  were  among  the  best 
producers.  The  Ceylon  plantations,  however,  suf- 
fered irretrievable  loss  from  the  damage  done  by  the 
insect,  "Hemleia  Vastatrix,"  while  the  other  produc- 
ing countries  of  the  Pacific,  such  as  Java,  Sumatra 
and  British  India,  are  now  falling  behind  because  of 
soil-exhaustion.  In  the  Brazilian  state  of  Rio,  also, 
the  phenomenon  of  soil-exhaustion  is  beginning  to 
manifest  itself.  On  the  other  hand,  Venezuela  and 
Central  America  have  prospects  of  greater  coffee  pro- 
duction in  the  near  future. 

Within  Brazil  itself  a  gradual  shifting  of  the  center 


ELEMENTS  OF  FOREIGN  TRADE  59 

of  coffee  production  from  the  state  of  Rio  to  that 
of  Santos  is  taking  place. 

Coffee  is  imported  into  Europe  largely  thru  the 
four  great  ports  of  London,  Hamburg,  Antwerp  and 
Havre.  The  Continental  ports  concentrate  their 
coffee  trade  in  their  speculative  markets. 

The  history  of  the  coffee  trade,  better  than  that  of 
any  other  commodity,  illustrates  the  effect  of  bumper 
crops  upon  the  market  price,  and  the  methods  by 
which  the  evils  of  this  effect  can  be  eliminated.  In 
1906,  the  coffee  production  of  Brazil  was  so  large  that 
the  price  fell  rapidly.  To  stop  this  depreciation  of 
the  nation's  wealth,  the  representatives  of  the  coffee- 
producing  states  of  Sao  Paolo,  Rio  de  Janeiro  and 
Minas  Geraes  formed  a  "Convenium"  which,  with  the 
aid  of  the  Federal  government,  carried  out  the  so- 
called  "valorization"  of  Brazil  coffee.  The  method 
was  simple;  seven  and  one  half  million  sacks  out  of 
a  total  of  twenty  million  (1,200,000  tons)  were  bought 
up  by  the  state  government  with  $15,000,000  bor- 
rowed from  European  bankers.  The  loan  was  paid 
back,  interest  and  capital,  with  the  proceeds  of  a  heavy 
export  tax  and  a  sale  of  the  seven  and  a  half  million 
sacks  of  coffee  bought  by  the  "Convenium."  The 
export  duties,  togetlier  with  the  withdrawal  of  over 
one-third  of  the  crop  from  the  market,  effectually 
restored  the  price  of  Brazilian  coffee  in  the  world's 
markets.  Thus,  in  Hamburg  the  price  of  "good  av- 
erage Santos"  rose  from  8^  a  pound,  in  1907,  to  13.9f 
in  1911. 


60 


FOREIGN  TRADE 


24.  Rubber. — The  industrial  use  of  rubber  besan 
largely  with  Goodyear's  invention  of  the  vulcanizing 
process  in  1842.  In  this  process,  the  application  of 
sulphur  makes  rubber  weather-proof.  Today,  great 
industries  are  dependent  upon  this  raw  material, 
which  is  used  in  everyday  life  in  such  forms  as  rubber- 
shoes,  waterproof  clothing,  automobile  tires  and 
electric  insulation. 

According  to  statistics  published  by  the  Raw  Pro- 
ducts Company  of  New  York  the  world's  production 
of  rubber  for  the  years  1900  to  1916  inclusive  has  been 
as  follows: 


WORLD'S  PRODUCTION  OF  RUBBER   (intoTis) 

PLANTATrON 

BRAZIL 

OTHER  GRADES 

TOTAL 

PERCENTAGE 
OF  INCREASE 
OR  DECREASE 

1900 

4 

5 

8 

21 

43 

145 

510 

1,000 

1,800 

3,600 

8,200 

14,419 

28,518 

47,618 

71,380 

106,136 

140,000 

26,750 
30,300 
28,700 
31,100 
30,000 
35,000 
36,000 
38,000 
39,000 
42,000 
40,800 
37,730 
42,410 
39,370 
37,000 
37,220 
37.000 

27,136 

24,545 

23,632 
24,829 
32,077 
27,000 
29,700 
30,000 
24,600 
24,000 
21,500 
23,000 
28,000 
21,452 
12,000 
16,625 
17,000 

53,890 

64,850 

52,340 

55,950 

62,120 

62,145 

66,210 

69,000 

65,400 

69,600 

70,500 

,75,149 

98,928 

108,440 

120,380 

159,980 

194,000 

1901 

+    1.7% 

1902 

—    4.5 ;? 
-h     6.8<^ 

1903 

1904 

+  n.o^ 

+       .004^ 
-+-     6.5^ 

1905 

IQOfi 

1907 

—     5.2^ 

~h     6A% 1 

1908 

1909 

1910 

'-t-     1.2^, 

1911 

M-     6.5^ 

1912 

4-   31.6^ 
-t-     9.0^ 

1913 

19U 

H-   11.0^' 

1915 

+   S2.8^ 

1916  (est.) 

-+-    21.2% 

This  table  shows  in  a  startling  way  the  increase  in 
the  production  of  plantation  rubber,  which  is  in 
marked  contrast  to  the  stationary  condition  of  the 
Brazilian  output  and  to  the  rapid  decrease  in  the  pro- 
duction of  African  rubber.  These  figures  permit  the 
conclusion  that  wild  Para  (i.e.,  Brazil)  rubber  from 


ELEMENTS  OF  FOREIGN  TRADE  61 

the  Amazon  regions  and  Congo  rubber  will  be  largely 
replaced  by  the  product  of  plantations  in  the  Far 
East.  English  and  German  capital  has  been  invested 
heavily  in  rubber  plantations  in  the  African  Colonies, 
but  especially  in  the  East  Indian  Islands,  the  Malay 
Peninsula,  Ceylon  and  certain  parts  of  British  India. 
Japan,  also,  is  eager  to  have  a  share  of  this  crop.  The 
output  of  natural  rubber  has  been  declining  as  the 
native  rubber-hunters,  inspired  by  a  greed  for  im- 
mediate profits,  and  with  no  regard  for  the  future, 
continue  to  "bleed"  the  rubber  trees  to  death. 

The  replacing  of  tree-rubber  by  a  synthetic  equiva- 
lent is  by  no  means  outside  of  the  range  of  possibility. 
The  necessary  process  has  been  invented,  but  it  has 
not  yet  proved  commercially  profitable.  Further- 
more, the  development  of  plantation  rubber  has 
favorably  affected  the  price  level  of  all  grades  of 
rubber,  in  the  face  of  an  unparalleled  increase  in  the 
demand,  and  has  thereby  lessened  the  necessity  of 
finding  an  artificial  substitute  for  the  natural  product. 

REVIEW 

In   what   sense   may   world-wide  trade   be   considered    a  mod- 
ern phenomenon? 

Explain  how  foreign  trade  rests  upon  differences  of  natural  re- 
sources, and  different  stages  of  economic  development. 

Explain  the  statement  that  future  trade  will  follow  longitude 
rather  than  latitude.     What  reasons  are  given  for  the  prediction  ? 

What  is  the  significance  of  the  coal  trade  for  Great  Britain? 

Describe  the  wheat  trade  and  recent  developments  in  it.  What 
other  cereals  enter  into  world  trade? 

Give  an  account  of  the  sugar  trade  and  the  competition  of 
cane  and  beet  sugar. 

Describe  the  trade  movements  in  cotton,  tobacco  and  rubber. 


CHAPTER  IV 

TRADE  INFORMATION  AND  PROMOTION 

1.  Intimate  relation  of  government  and  foreign 
trade. — In  the  beginning  of  modern  times  foreign 
trade  was  the  object  of  soHcitous  interest  on  the  part 
of  the  government.  As  a  factor  in  national  affairs, 
foreign  trade  loomed  far  larger  than  it  does  today. 
For  a  century  or  more  before  the  time  of  Adam  Smith 
the  chief  object  of  the  commercial  policies  of  nations 
was  to  secure  a  favorable  balance  of  trade  and  pro- 
mote the  importation  of  gold.  A  whole  school  of 
political  philosophy  which  dominated  the  government 
action  in  this  period  held  up  foreign  trade  as  the  pri- 
mary source  of  the  growth  of  national  wealth. 

2.  Revenues. — Another  reason  for  the  extraordi- 
nary emphasis  placed  upon  foreign  trade  was  the 
intimate  association  between  the  exported  and  im- 
ported goods  and  the  revenues  of  the  state.  Customs 
duties  on  imports,  and  often  on  exports  formed  the 
chief  source  of  public  revenues.  The  imposition  of 
taxes  always  brings  with  it  the  intervention  of  the 
government  authorities  in  business  affairs.  Hence,  no 
other  branch  of  economic  activity  was  so  early  or  so 
uniformly  subjected  to  the  scrutiny  and  supervision 
of  the  public  authorities. 

Long  after  the  idea  was  discarded  that  foreign 

62 


TRADE   PROMOTION  63 

trade  was  the  sole  source  of  national  wealth  the  fact 
remained  that  it  was,  if  not  the  sole  source,  at  least 
the  most  prominent  source  of  public  income.  Hence 
governments  thruout  the  world  continued  to  watch 
carefully  the  import  and  export  movement,  and  on  no 
other  branch  of  business  is  our  information  so  com- 
plete as  here. 

3.  Shipping. — On  account  of  this  interest  in  for- 
eign trade  governments  everywhere  exercise  special 
supervision  over  shipping.  In  the  United  States  ship- 
ping is  regulated  by  the  Federal  government  thru 
the  Bureau  of  Navigation  in  the  Department  of  Com- 
merce. The  Commissioner  of  Navigation  is  given 
plenary  jurisdiction  over  the  commercial,  marine  and 
merchant  seamen  of  the  United  States  so  far  as  they 
are  not  subject  under  the  laws  to  any  other  authority. 
His  duties  include: 

the  registering,  enrolling  and  licensing  of  American  ves- 
sels, the  measurement  of  vessels,  the  Interpretation  of  the 
tonnage  tax  laws,  the  listing  and  describing  of  all  American 
vessels,  the  Issuance  of  Instructions  to  the  collectors  of  cus- 
toms In  regard  to  the  documenting  of  vessels,  and  their  clear- 
ance, entry,  and  movements,  and  Instructions  In  regard  to 
the  entry  of  vessels  Into  ports  subject  to  quarantine,  the 
enforcement  of  the  law  for  the  protection  of  seamen,  and  the 
publication  of  statistics  relating  to  the  merchant  marine  and 
the  American  shipping  Industry. 

Thru  other  agencies  the  Federal  government  main- 
tains lighthouses,  charts  navigable  waters,  lends  as- 
sistance to  vessels  in  distress,  and  patrols  the  coast  to 
succor  the  ship-wrecked. 

XV— 6 


64  FOREIGN  TRADE 

Quite  as  far-reaching  are  the  services  rendered  to 
shipping  by  analogous  government  bodies  in  Canada 
and  other  countries. 

4.  Trade  information. — One  of  the  chief  aids  which 
governments  give  to  those  interested  in  foreign  trade 
is  the  publication  of  general  information  on  trade  con- 
ditions. In  the  United  States  this  work  is  centered  in 
the  Bureau  of  Foreign  and  Domestic  Commerce  of 
the  Department  of  Commerce. 

Publications  of  this  character  relate  either  to  trade 
opportunities  or  the  statistical  records  of  trade.  The 
work  of  the  Bureau  of  Foreign  and  Domestic  Com- 
merce in  bringing  trade  opportunities  to  the  attention 
of  the  business  men  of  the  United  States  is  considered 
in  some  detail  in  the  Modern  Business  Text  on  "Busi- 
ness and  the  Government." 

Statistics  of  foreign  trade  are  published  monthly 
by  the  Bureau  in  pamphlet  form.  Annual  figures 
with  greater  detail  are  published  in  a  large  volume  on 
Commerce  and  Navigation  of  the  United  States. 

It  may  be  added  that  corresponding  commercial 
statistics,  monthly  and  annual,  are  published  by  prac- 
tically all  countries  which  have  any  considerable  for- 
eign trade. 

The  material  thus  published  is  usually  made  avail- 
able for  business  men  gratis  or  at  a  nominal  price. 
They  constitute  much  more  than  a  record  of  govern- 
ment activities,  for  they  bring  to  the  business  man  a 
wider  outlook  on  aiFairs,  and  the  relations  between 
foreign  trade  and  domestic  production.     To  the  ex- 


TRADE  PROMOTION  65 

porter  or  to  the  manufacturer  who  produces  for  ex- 
port they  are  invaluable.  Much  of  the  information 
they  contain  is  summarized  in  the  daily  press  and  in 
trade  papers,  but  there  come  situations  in  business 
which  require  an  exact  knowledge  of  the  facts  obtain- 
able only  from  the  original  sources. 

5.  Difficulty  of  obtaining  Americans  for  positions 
abroad. — The  unwillingness  of  the  American  citizen 
to  face  permanent  or  even  long  expatriation,  goes  far 
toward  explaining  why  it  is  difficult  to  obtain  Ameri- 
cans to  fill  posts  abroad.  And  even  those  that  accept 
such  positions  seldom  wish  to  retain  them  for  a  period 
of  more  than  three  years.  The  novelty  of  the  new 
land  wears  off,  and  the  ties  that  bind  the  American  to 
home  and  friends  are,  generally  speaking,  stronger 
than  those  that  can  be  knit  abroad.  Home  opportu- 
nities for  lucrative  employment  and  rapid  advance- 
ment are  so  great  that  young  Americans  endowed 
with  the  basic  qualities  of  resourcefulness  and  initia- 
tive hesitate  to  enter  the  foreign  field. 

On  this  account  American  firms  have  been  com- 
pelled to  employ  many  foreigners  in  their  export 
branches  or  export  departments.  The  disadvantage 
involved  is  considerable.  Foreign  employes  often 
make  ideal  clerks  and  correspondents,  but  frequently 
lack  the  resourcefulness  and  initiative  that  are  neces- 
sary in  higher  posts.  The  desirability  of  employing 
Americans  in  foreign  trade  fields  will  become  greater 
as  the  international  rivalry  in  the  markets  of  the  world 
increases. 


66  FOREIGN  TRADE 

6.  Training  needed. — Mr.  James  J.  Farrell,  Pres- 
ident of  the  United  States  Steel  Corporation,  has 
given  the  following  statement  of  the  chief  requisite 
for  a  successful  career  in  foreign  trade  :^ 

1.  A  well  grounded  knowledge  of  the  English  language, 
to  permit  clear  and  concise  expression.  A  knowledge  of  one 
or  more  languages  in  addition  to  English. 

2.  A  comprehensive  knowledge  of  the  fundamental  rules  of 
arithmetic,  including  percentage,  merchandise  and  currency 
calculations,  and  short  methods  of  accurate  computation. 

3.  A  practical  knowledge  of  business-office  routine,  includ- 
ing the  proper  handling  of  mail,  receipt  and  preparation  of 
orders,  invoicing  and  accounting. 

4.  A  practical  working  knowledge  of  the  routine  of  the 
manufacture  of  any  given  line  of  products,  including  the 
elements  of  cost  of  production.  If  this  can  be  arranged  by 
actual  experience  in  manufacture,  the  results  are  likely  to 
be  of  greater  benefit  than  the  superficial,  limited  inspection 
of  manufacturing  processes  frequently  used  as  the  basis  of  a 
salesman's  equipment. 

5.  Sufficient  acquaintance  with  commercial  law  and  prac- 
tice, particularly  with  respect  to  the  negotiation  of  ordinary 
business  contracts,  to  enable  determination  of  ordinary  ques- 
tions relating  to  business  without  frequent  recourse  to  legal 
assistance. 

6.  A  knowledge  of  domestic  and  foreign  markets,  based 
upon  a  careful  study  of  natural  and  manufactured  products, 
and  their  application  to  the  commerce  of  nations. 

7.  Systematic  study  of  the  ocean-borne  transportation  of 
the  world,  to  attain  a  degree  of  familiarity  with  the  types 
of  steamers  suitable  for  the  various  cargoes  adapted  to  re- 
spective trades,  the  loading  of  such  steamers,  the  relation 
of  freight  rates  to  measurement  and  weight  cargo  and  to 
the  class  of  cargo,  a  general  knowledge  of  the  fundamentals 

ij.  J.  Farrell,  on  "Educational  Requirements,"  Proceedings  of  the 
Third  National  Foreign  Trade  Convention,  p.  173. 


TRADE  PROMOTION  67 

of  chartering,  ocean  bills  of  lading,  marine  and  war-risk 
insurance,  and  similar  subjects  identified  with  ocean  trans- 
portation. If  the  products  to  be  sold  come  into  competi- 
tion with  home  manufactures  or  with  materials  on  which 
there  are  discriminatory  duties  in  favor  of  other  nations, 
the  study  of  the  customs  tariffs  would  ultimately  be  essen- 
tial. 

7.  Training  available. — To  meet  the  growing  re- 
quirements of  our  expanding  foreign  trade,  various 
organizations  and  institutions  are  establishing  new 
branches  and  arranging  for  new  courses.  There  is  a 
continually  growing  number  of  special  courses  oiFered 
by  schools,  colleges  and  universities,  by  Y.  M.  C.  A.'s 
and  other  semi-philanthropic  organizations  and  by 
business  houses.  These  courses,  which  cover  a  wide 
range,  include  economics,  modern  languages,  indus- 
trial organization,  commercial  geography,  finance, 
banking,  transportation,  tariffs,  business  manage- 
ment, accounting  and  statistics.  The  aim  of  such  edu- 
cational work  should  be  to  give  a  man  a  solid  founda- 
tion in  the  elements  of  business  life  which  will  enable 
him  to  specialize  successfully  in  any  particular  field  he 
may  enter. 

Our  large  corporations  fully  realize  the  importance 
of  thoro  training  for  activity  in  foreign  trade,  as  well 
as  the  necessity  for  a  general  education.  Many  be- 
lieve that  in  the  proper  education  of  our  young  men 
in  business,  lies  the  only  guarantee  of  the  future  wel- 
fare of  this  country.  Mr.  W.  S.  Kies,  Vice-President 
of  the  National  City  Bank,  holds  that  upon  the  abil- 
ity of  this  country  to  develop  in  the  next  few  years 


68  FOREIGN  TRADE 

the  type  of  young  man  who  can  succeed  in  foreign 
countries,  will  depend  the  future  of  the  country  as  a 
commercial  nation.  This  bank  has  an  unusually  large 
and  flourishing  school  for  the  training  not  only  of  men 
for  its  rapidly  multiplying  foreign  branches,  but  of 
home  employes  who  might  profit  from  a  familiarity 
with  foreign  trade. 

8.  Canada's  efforts. — It  is  unfortunately  true  that 
practically  no  special  steps  are  being  taken  in  Canada 
to  give  men  interested  in  foreign  trade  a  thoro  train- 
ing in  the  technic  of  the  subject  or  a  knowledge  of  the 
commercial  languages  spoken  in  the  various  export 
fields.  In  the  universities,  of  course,  instruction  is 
given  in  economics,  commercial  geography,  the  theory 
of  international  trade,  tariff's,  banking  and  finance, 
transportation,  accounting  and  statistics,  and  the 
modern  languages. 

Much  needs  to  be  done  by  Canada  to  provide  the 
training  which  is  going  to  be  so  essential  in  the  com- 
ing period  of  trade  expansion.  Manufacturers  who 
are  now  establishing  or  proposing  to  establish  export 
departments  find  it  very  difficult,  if  not  impossible,  to 
find  men  with  the  necessary  qualifications  to  handle 
the  export  work.  Other  business  men — men  with 
considerable  experience  in  foreign  trade — make  the 
complaint  that  except  at  the  head  offices  or  in  impor- 
tant shipping  centers  there  are  very  few  men  con- 
nected with  the  banks  who  are  well  informed  in  regard 
to  the  needs  and  the  technic  of  export  business. 


TRADE  PR0:M0TI0N  69 

9.  General  work  of  the  Philadelphia  Commercial 
Museum. — A  case  of  a  public  institution  that  devotes 
considerable  effort  to  imparting  a  general  knowledge 
of  commerce  is  furnished  by  the  Philadelphia  Com- 
mercial Museum,  supported  by  the  city  of  Philadel- 
phia and  the  state  of  Pennsylvania.  Its  object  is  ac- 
complished largely  thru  exhibits,  miniature  museums 
and  lectures.  The  exhibits  installed  in  the  main  build- 
ing of  the  Museum  represent  the  commercial  mate- 
rials of  the  world,  and  the  imports  and  exports  as  well 
as  the  manners  and  customs  of  foreign  countries.  The 
main  purpose  of  these  exhibits  is  to  give  a  vivid  idea 
of  the  chief  characteristics  of  foreign  peoples,  and  of 
the  products  of  their  countries.  More  than  two  thou- 
sand miniature  museums,  that  show  commercial  prod- 
ucts, photographs,  and  maps,  have  been  distributed 
among  the  schools  of  Pennsylvania.  A  system  has 
also  been  developed  whereby  daily  illustrated  lectures 
are  delivered  to  the  schools  by  members  of  a  regular 
staff.  These  talks  are  given  in  the  lecture  hall  of  the 
Museum.  Free,  illustrated  public  lectures  on  topics 
pertaining  to  commerce  and  travel  are  also  given 
weekly  during  a  large  part  of  the  year.  The  work  of 
the  Export  Department  of  this  institution  will  be 
taken  up  below. 

An  interesting  course  on  foreign  trade  is  being 
given  by  the  Export  Bureau  of  the  Philadelphia 
Chamber  of  Commerce  in  collaboration  with  the  Edu- 
cational Bureau  of  the  Y.  M.  C.  A.  Besides  a  course 
in  foreign  languages  and  more  elementary  subjects 


70  FOREIGN  TRADE 

that  have  a  bearing  on  foreign  trade,  a  special  course 
on  exports  is  given  which  touches  upon  eveiy  phase 
of  export  shipping,  export  selling,  international  credit 
and  settlement,  and  trade  conditions  in  selected  ex- 
port markets. 

10.  Private  organs  of  information. — Not  only  does 
foreign  trade  bring  profit  to  those  immediately  en- 
gaged in  its  pursuit,  but  its  advantages  extend  indi- 
rectly to  such  concerns  as  railroads,  banks,  express 
companies  and  trade  papers.  Since  the  increase  in 
their  profits  is  in  direct  proportion  to  that  of  the  for- 
eign trade  itself,  these  enterprises  are  naturally  inter- 
ested in  its  development  and  are  therefore  interested 
in  lending  their  aid  to  individuals. 

There  are  two  classes  of  institutions  engaged  in  the 
work  of  disseminating  information  concerning  foreign 
trade.  First,  there  are  those  corporations  which 
incidentally  spread  information  concerning  foreign 
trade  possibilities  and  foreign  credit  conditions,  be- 
sides carrying  on  their  regular  work — banking  or 
transportation,  for  instance.  Secondly,  there  are 
those  businesses  and  institutions  which  devote  them- 
selves entirely  to  this  kind  of  work,  either  for  the  sake 
of  private  gain  or  else  in  the  interest  of  the  public 
welfare. 

11.  Important  service  of  express  companies. — A 
good  example  is  the  work  in  connection  with  foreign- 
trade  service  rendered  by  one  of  the  great  express 
companies.  This  company  has  organized  a  foreign- 
trade  information  bureau  as  a  part  of  its  foreign  de- 


TRADE  PROMOTION  71 

partment.  Its  activities  are  twofold.  It  dissemi- 
nates reliable  information  on  foreign  markets  and 
renders  practical  assistance  in  the  introduction  of 
American  goods  and  in  the  securing  of  proper  con- 
nections in  foreign  fields.  Thru  its  direct  connection 
with  the  numerous  foreign  offices  of  the  company,  the 
foreign-trade  information  bureau  is  in  a  position  to 
act  as  a  clearing-house  of  valuable  information  which 
might  not  be  secured  from  any  other  source.  It  is 
in  a  position  also  to  report  on  the  following  subjects: 
currency  and  exchange  conditions,  weights  and  meas- 
ures, steamship  lines  and  routes,  postal  regulations, 
foreign  competition,  introductory  and  selling  meth- 
ods, trade  conditions,  general  credit  terms,  catalogs 
and  trade  literature  requirements;  the  course,  time 
and  frequency  of  shipping  routes,  the  consular  invoice 
regulations,  marine  insurance,  special  packing,  meth- 
ods of  financing  foreign  shipments,  collections,  and 
patent  and  trade-mark  laws.  And  not  only  is  infor- 
mation given  on  all  these  various  subjects,  but  actual 
assistance  is  rendered  in  connection  with  all  the  prin- 
cipal problems  of  foreign  trade. 

12.  Banks  as  sources  of  promotion. — The  great 
banks,  also,  that  interest  themselves  specifically  in  the 
promotion  of  foreign  trade,  have  an  extensive  infor- 
mation service.  Thru  a  publicity  bureau  general  in- 
formation is  given  out  in  special  pamphlets  and  let- 
ters, sent  out  at  regular  intervals,  which  discuss,  from 
the  standpoint  of  general  business,  the  economic  con- 
ditions of  those  markets  in  whose  development  the 


72  FOREIGN  TRADE 

bank  is  particularly  interested.  For  example,  the 
Guaranty  Trust  Company  of  New  York  issues  book- 
lets on  Cuba,  Argentine,  Russia  and  China.  The 
same  institution  has  also  pubHshed  a  book  entitled 
"How  Business  with  Foreign  Countries  is  Financed," 
which  is  largely  a  compilation  of  the  various  docu- 
ments used  in  foreign  trade  and  shipping,  such  as  bills 
of  lading,  marine  insurance  certificates,  commercial 
drafts,  consular  invoices,  commercial  letters  of  credit, 
bank  acceptances  and  trust  receipts.  The  National 
City  Bank  publishes  pamphlets  of  a  similar  nature; 
for  example,  the  following:  "Acceptances,"  "Federal 
Reserve  and  National  Bank  Acts,"  "Active  Regula- 
tions and  Circulars  of  the  Federal  Resei-i^e  Board," 
"Foreign  Commerce  in  American  Textiles,"  "Branch 
Banks  and  Foreign  Trade."  In  addition,  the  National 
City  Bank  publishes  a  monthly  magazine  entitled 
"The  Americas f  which  contains  a  wealth  of  informa- 
ton  pertaining  to  conditions  in  foreign  markets,  for- 
eign trade  methods,  foreign  banking  and  aUied  sub- 
jects. The  First  National  Bank  of  Boston  whose 
Foreign  Department  has  extensive  connections,  pub- 
lishes monthly  a  valuable  "Foreign  Trade  Letter."  ^ 

1  The  Canadian  banks  do  not  go  so  far  as  to  issue  special  pamphlets 
or  regular  letters  as  is  done  by  the  United  States  banks.  The  more  pro- 
gressive banks  do  however  give  similar  information  to  their  own  clients 
in  a  less  formal  and  public  way.  For  instance  an  advertisement  of  the 
Canadian  Bank  of  Commerce  reads  as  follows:  "Extension  of  Canadian 
trade.  The  bank  will  make  inquiries  into  the  possibilities  and  require- 
ments of  markets  abroad  for  exporters  or  importers  who  desire  to  extend 
their  trade  with  British  colonies  or  possessions.  Owing  to  the  large  num- 
ber of  its  correspondents  and  agents  it  has  unusual  facilities  for  this 
work." 


TRADE  PRO:^IOTION  73 

Another  phase  of  this  interest  of  the  banks  is  the 
fostering  of  concerns  devoted  to  foreign  trade.  Thus 
the  American  International  Corporation  with  a  cap- 
ital of  $50,000,000  was  launched  by  a  group  of  bank- 
ing interests  led  by  the  National  City  Bank  of  New 
York. 

13.  Foreign  trade  department  of  the  Philadelphia 
Commercial  Museum. — Another  important  source  of 
information  regarding  foreign  trade  is  the  Foreign 
Trade  Department  of  the  Philadelphia  Commercial 
Museum.  Long  before  there  was  a  Bureau  of  For- 
eign and  Domestic  Commerce  in  Washington,  this 
institution,  financed  by  the  city  of  Philadelphia  and 
the  state  of  Pennsylvania,  was  conducting  work  very 
similar  to  that  now  done  by  the  Government's  Bureau. 
Members  of  the  staff  of  the  Philadelphia  Museum 
have  been  sent  to  almost  every  part  of  the  world  to 
establish  connections  with  business  organizations,  gov- 
ernmental bureaus,  banking  institutions,  bureaus  of 
general  information,  and  private  concerns.  Thru 
these  connections  the  Philadelphia  institution  con- 
stantly receives  fresh  data  bearing  on  the  trade  and 
commerce  of  foreign  countries,  including  a  large 
amount  of  information  concerning  trade  opportuni- 
ties. 

The  large  staff  of  the  Foreign  Trade  Bureau — 
which  consists  of  a  great  number  of  well-trained  men 
— answers  hundreds  of  inquiries  every  day,  relating 
to  practically  every  phase  of  the  export  trade.  It  also 
acts  as  an  adviser  to  not  a  few  foreign  firms  that  ap- 


74.  FOREIGN  TRADE 

peal  to  the  Museum  for  assistance  in  establishing  busi- 
ness relations  in  the  United  States.  It  has  corre- 
spondents in  almost  every  city  of  any  commercial  im- 
portance in  the  world,  and  it  is  in  constant  communi- 
cation with  several  hundred  trade  organizations 
abroad  with  which  it  has  made  an  arrangement  for 
reciprocal  service.  An  exceptionally  large  library 
makes  it  possible  for  the  staff  of  the  Bureau,  as  well 
as  other  readers,  to  secure  easily  any  printed  infor- 
mation concerning  important  subjects. 

The  Foreign  Trade  Bureau  publishes  two  periodi- 
cals, one  of  which,  "Commercial  America f^  is  issued 
in  both  English  and  Spanish.  It  circulates  widely 
among  importing  houses  in  all  parts  of  the  world. 
The  other,  the  "Weekly  Export  Bulletin''  is  de- 
signed principally  for  distribution  among  manufac- 
turers in  this  country  who  are  interested  in  foreign 
trade. 

One  of  the  features  of  the  work  of  the  Bureau  is  the 
collection  of  credit  information.  In  this  field  it  ren- 
ders services  similar  to  those  of  the  great  mercantile 
agencies,  R.  G.  Dun  and  Company  and  the  Brad- 
street  Company,  which  were  established  in  1841  and 
1849  respectively.  Few  people  realize  what  an  im- 
measurable superiority  of  method  the  books  of  ratings 
published  by  these  companies  afford  to  the  American 
merchant,  compared  to  that  available  in  foreign  coun- 
tries. As  the  granting  of  impersonal  mercantile  credit 
came  to  be  in  vogue  in  foreign  as  well  as  in  domestic 
business,  these  companies  branched  out  into  foreign 


TRADE  PROMOTION  75 

countries.  The  Bradstreet  Company  has  today  116 
offices  outside  of  the  United  States,  which  are  oper- 
ated either  by  the  company  itself  or  by  Bradstreet  in 
conjunction  with  other  concerns.  R.  G.  Dun  and 
Company  are  represented  in  foreign  countries  by  93 
branch  offices.  Thru  the  widely  ramified  organiza- 
tions of  these  two  firms,  the  miller  upon  the  remote 
banks  of  the  Don  and  the  merchant  trader  on  the 
Amazon  can  both  be  brought  into  touch  with  the 
American  who  seeks  commercial  relations  with  them. 

14.  The  National  Foreign  Trade  Council. — The 
publications  of  the  National  Foreign  Trade  Council 
constitute  a  valuable  source  of  information  on  matters 
pertaining  to  the  development  of  foreign  trade.  So 
far,  four  large  volumes  have  been  published,  which 
contain  the  records  of  the  national  Foreign  Trade 
Conventions  called  by  the  Council.  Besides  these, 
there  are  several  monographs  that  deal  with  the  ac- 
tivities in  the  special  fields  of  foreign  trade.  The 
report  of  the  International  Trade  Conference  held 
under  the  auspices  of  the  National  Association  of 
Manufacturers,  December,  1915,  is  also  a  valuable 
contribution  to  the  literature  on  foreign  trade. ^ 

15.  Trade  papers. — Some  of  the  trade  papers  hare 
established  such  valuable  connections  with  foreign 
countries  that  their  aid  has  become  indispensable  to 
many  concerns.  In  some  cases  other  service  is  ren- 
dered besides  the  dissemination  of  information  thru 

1  The  Canadian  Manufacturers'  Association  fulfills,  among  other  func- 
tions, many  of  those  intrusted  to  the  Council. 


76  FOREIGN  TRADE 

timely  articles,  editorials  and  advertising  matter.  For 
example,  letters  written  in  foreign  languages,  and  se- 
cured as  a  result  of  advertising,  are  translated  free 
of  charge,  and  lists  of  the  names  of  selected  buyers  in 
any  trade  and  in  any  market,  as  well  as  the  financial 
ratings  of  foreign  firms  who  apply  for  credit,  are  sup- 
plied to  any  who  may  wish  them.  Moreover,  expert 
assistance  is  given  to  those  who  wish  to  solve  any  spe- 
cial problems  that  arise  in  connection  with  the  estab- 
lishment of  new  trade  connections  in  foreign  coun- 
tries. 

Some  of  the  Canadian  trade  papers,  while  not  going 
so  far  as  those  in  the  United  States,  also  do  a  good 
deal  to  assist  foreign  trade  by  publishing  special  arti- 
cles, opportune  editorials  and  advertising  matter. 
Most  of  them  indeed  have  a  special  section  devoted 
solely  to  foreign  markets  and  the  Canadian  export 
trade. 

16.  Branch  banks. — The  Federal  Reserve  Act  has 
to  some  extent  emancipated  the  foreign  trade  of  the 
United  States  from  the  control  of  foreign  bankers  by 
permitting  National  banks  to  establish  branches  in 
foreign  countries.  Before  this  act  existed,  branch 
banking  was  practically  an  impossibility  for  Amer-  t 
ican  banks.  With  few  exceptions,  the  states  do  not  * 
grant  to  banks  operating  under  a  state  charter  the 
right  of  establishing,  branches.  When  this  right  is 
granted  by  the  state,  it  usually  is  restricted  to  apply 
only  in  the  city  in  which  the  bank  is  located.  Trust 
companies  were  formerly  the  only  banking  institu- 


TRADE  PROMOTION  77 

tions  which,  as  a  class,  according  to  the  laws  of  most 
states,  could  establish  branch  banks  in  foreign  coun- 
tries. An  exception  to  this  rule  was  the  granting  of  a 
special  charter  in  1901  by  the  state  of  Connecticut  to 
the  International  Banking  Corporation,  w^hich  was 
thereby  empowered  to  establish  branches  in  any  part 
of  the  world.  This  charter,  however,  is  unique;  no 
other  banking  institution  possesses  one  approaching 
it  in  scope. 

Forty  British  banks  operating  in  foreign  countries 
have  1,325  branches,  and  in  South  America  alone, 
five  German  banks  have  forty  branches.  Thru  their 
branch  banks  the  great  commercial  nations  of  Europe 
have  exercised  a  powerful  control  over  the  trade  rela- 
tions of  these  oversea  countries.  Largely  by  means  of 
this  banking  control  Great  Britain,  Germany  and 
France  exacted  heavy  tribute  in  all  transactions  with 
the  countries  in  which  their  influence  was  so  strongly 
felt.  American  goods  imported  into  South  America, 
for  instance,  were  in  many  cases  sent  by  way  of  Eng- 
land, and  even  when  they  were  exported  directly  they 
were  paid  for  by  drafts  on  London  or  some  other 
European  international  financing  center.  Even  goods 
imported  into  this  country  were  formerly  paid  for — 
and  many  of  them  are  still  paid  for — thru  foreign 
bankers. 

The  relief  that  the  Federal  Reserve  Act  brought 
was  almost  immediate.  One  result  has  been  the  estab- 
lishment of  numerous  branches  of  the  National  City 
Bank  of  New  York  in  foreign  countries.    In  order  to 


78  FOREIGN  TRADE 

furnish  facilities  in  the  Orient,  the  National  City 
Bank  has  acquired  the  International  Banking  Cor- 
poration with  its  sixteen  branches  in  India,  China, 
Japan  and  the  Philippines.  These  branches  are  be- 
ing operated  independently  but  in  the  closest  harmony 
with  the  branches  of  the  City  Bank.  Each  branch  is 
provided  with  a  trade  department  and  a  special  credit 
department  which  are  the  means  of  making  the  branch 
banks  powerful  promoters  of  American  commerce. 
It  is  said  that  twice  the  present  number  of  branch 
banks  would  have  been  opened  if  it  had  been  possible 
to  equip  them  with  staffs  composed  of  capable  Amer- 
icans. To  provide  such  staffs  is  essential  in  order  to 
overcome  local  prejudices  and  win  the  good- will  of 
the  foreign  countries  for  the  American  banker. 

17.  Dollar  exchange. — Perhaps  the  greatest  single 
service  rendered  by  these  branch  banks  is  the  building 
up  of  a  market  for  dollar  exchange.  Mr.  W.  S.  Kies 
of  the  National  City  Bank  refers  in  the  following 
words  to  the  urgent  need  for  this  service : 

Before  the  establishment  of  branches  in  Brazil,  Argentina 
and  Uruguay,  the  dollar  was  not  even  quoted.  During  the 
last  year  the  volume  of  direct  exchange  between  these  coun- 
tries and  the  United  States  has  been  remarkable,  and  prac- 
tically all  the  shipments  of  wool,  hides,  quebracho,  and  a 
large  portion  of  the  coffee,  have  been  financed  thru  the 
medium  of  dollar  credits. 

England's  pre-eminence  as  the  world's  financial 
market  is,  to  a  large  extent,  due  to  the  services  per- 
formed by  the  English  acceptance  houses,  and  to  the 


TRADE  PROMOTION  79 

existence  of  an  active  discount  market  for  bills  on 
London  originating  in  all  parts  of  the  world.  The 
introduction  of  the  trade  acceptance  into  American 
banking  brought  about  by  the  provision  in  Sec.  84 
of  the  Federal  Reserve  Act,  has  effected  a  great  im- 
provement in  the  methods  by  which  foreign  trade  may 
be  financed.  It  cannot  be  expected  that  the  American 
bill  drawn  in  dollars  will  wholly  take  the  place  of  the 
London  bill,  but  considering  the  establishment  of 
branch  banks — many  of  them  in  strategic  markets  of 
the  world — and  the  combination  of  circumstances  now 
favoring  this  country,  it  can  confidently  be  expected 
that  the  bill  on  New  York  will  soon  become  a  recog- 
nized medium  for  settling  balances  in  international 
trade. 

18.  Foreign  investments. — One  of  the  features  that 
account  for  the  great  value  of  branch  banks  in  inter- 
national commerce  is  the  assistance  which  they  render 
in  connection  with  international  investments.  The 
idea  that  trade  follows  the  flag  has  of  late  been  largely 
superseded  by  the  realization  that  "trade  follows  for- 
eign investment."  The  countries  that  have  contrib- 
uted capital  for  the  development  of  other  countries 
have  reaped  from  the  financial  relationship  involved, 
great  commercial  advantages.  When  a  nation  invests 
systematically  and  to  a  great  extent  in  foreign  coun- 
tries the  entire  capital  invariably  goes  out  in  the  form 
of  machinery,  materials  for  construction,  tools  and 
general  supplies  for  the  construction  forces.  And 
when  the  foreign  enterprises  have  been  thus  brought 

XV — 7 


80  FOREIGN  TRADE 

to  life,  they  continue  to  buy  supplies  for  maintenance 
repairs  and  renewals.  Even  loans  to  foreign  govern- 
ments and  municipalities  are  of  very  great  importance 
in  the  building  up  of  foreign  commerce.  England, 
Germany  and  France  have  put  into  Argentine,  Bra- 
zil and  Uruguay  in  the  last  twenty-five  years  approxi- 
mately $4,000,000,000  and,  as  a  result,  enjoy  together 
46  per  cent  of  the  total  trade  of  these  three  countries. 
At  the  outbreak  of  the  great  European  war  it  was 
intimated  that  British  investments  in  foreign  coun- 
tries amounted  to  not  less  than  $20,000,000,000.  Of 
this  amount,  $9,240,000,000  was  invested  in  British 
colonies,  dominions  and  possessions,  and  $3,160,000,- 
000  in  the  United  States.  Consequently,  if  that  esti- 
mate was  correct,  $7,600,000,000  was  invested  in  other 
parts  of  the  world.  In  a  pamphlet  issued  by  the  Na- 
tional City  Bank  of  New  York  the  statement  is  made : 
"Of  the  annual  return  on  this  vast  amount,  the  cred- 
itor nation  has  never  taken  all,  but  has  left  a  sum 
ranging  between  $600,000,000  and  $800,000,000  for 
reinvestment." 

19.  Foreign  branches  of  Canadian  hanks. — Fortu- 
nately the  Canadian  Bank  Act  permits  the  chartered 
banks  to  open  branches  outside  of  Canada,  and  sev- 
eral of  the  leading  banks  have  established  branches  or 
agencies  in  London,  Paris,  New  York  and  other 
points  in  the  United  States,  Newfoundland,  the  West 
Indies  and  Mexico.  Those  in  London  and  New  York 
were  established  chiefly  because  of  the  necessity  of 
maintaining  adequate  reserves  outside  of  Canada  and 


TRADE  PROMOTION  81 

the  facilities  afforded  in  these  financial  centers  for 
international  exchange  operations.  In  regard  to  the 
others,  however,  the  policy  seems  to  have  been  gov- 
erned not  so  much  by  a  desire  to  compete  for  local 
trade,  as  by  the  exigencies  of  the  banks'  own  or  their 
customers'  business. 

The  question  is  sometimes  asked  whether,  apart 
from  a  few  such  instances,  Canadian  banks  have  done 
all  that  was  possible  to  build  up  foreign  trade.  Com- 
plaints are  not  frequent  but  they  have  occasionally 
been  made.  To  quote  a  man  prominently  connected 
with  the  export  business: — "There  has  been  little  or 
no  concerted  action  in  the  past  to  organize  the  export 
fields,  with  the  result  that  Canadian  banks  have  pro- 
vided little  or  no  special  machinery  for  this  class  of 
business,  and  are  not  particularly  well-informed  with 
regard  to  the  necessity  of  their  cooperation  in  export 
business,  except  at  their  head  offices  or  in  important 
shipping  centers."  The  Canadian  Trade  Commis- 
sioner in  the  Argentine  Republic  has  frequently 
pointed  out  that  before  a  large  trade  can  be  built  up 
with  that  market  better  shipping  and  banking  facili- 
ties must  be  provided. 

20.  Canada  s  foreign  investments. — While  the 
shrewdest  of  Canada's  business  and  financial  men  may 
have  long  since  realized  the  truth  in  the  maxim  that 
trade  follows  the  loan,  yet  as  a  matter  of  practical 
policy  any  large  recourse  to  this  method  of  cultivating 
trade  has  been  impossible.  True  it  is  that  Canadians 
played  a  unique  part  in  the  exploitation  of  the  light 


82  FOREIGN  TRADE 


I 


and  power  traction  opportunities  of  Latin  America^ 
especially  Brazil,  Mexico  and  the  West  Indies,  bul 
the  credit  is  due  to  Canadian  enterprise  working 
largely  with  foreign  capital.  Canadian  railroads, 
again,  have  built,  bought  and  leased  over  7,000  miles 
of  road  in  the  United  States  or  nearly  one-quarter  the 
extent  of  the  whole  Canadian  railway  system.  But 
as  has  already  been  shown,  Canada,  "with  half  a  con-  i( 
tinent  held  in  trust,  its  resources  little  known  and  less 
developed,"  must  for  many  a  year  remain  a  seeker  of 
capital. 

21.  Railroads  and  foreign  trade. — Finally,  the 
transportation  companies  are  in  a  position  to  aid  very 
considerably  the  development  of  foreign  trade. 
Edward  N.  Hurley,  formerly  of  the  Federal  Trade 
Commission,  may  have  attached  exaggerated  impor- 
tance to  the  part  that  railroads  can  play  in  this  respect 
when  he  stated  that  the  establishment,  by  the  railroads, 
of  foreign  trade  departments  would  mean  the  virtual 
prevention  of  panics  and  periods  of  business  depres- 
sions. There  is  no  doubt,  however,  that  they  can  do  ^ 
much.  fl 

REVIEW  * 

What  is  the  historical  reason  for  the  governments  of  the  world 
giving  especial  attention  to  the  foreign  trade  and  shipping? 

Describe  the  general  nature  of  the  information  regarding  for- 
eign trade  which  governments  make  available. 

Explain  the  need  of  special  training  for  work  in  foreign  trade. 

Describe  the  educational  work  of  the  National  City  Bank,  and 
the  Philadelphia  Commercial  Museum, 

What  kinds  of  corporations  and  business  concerns  are  inter- 


TRADE  PROMOTION  83 

ested  in  disseminating  information  upon  foreign  trade,  and  what 
means  do  they  employ? 

How  do  branch  banks  promote  foreign  trade? 

What  is  meant  by  dollar  exchange?  What  is  the  outlook  for 
its  wider  use? 

Explain  how  investments  in  foreign  countries  promote  foreign 
trade. 


CHAPTER  V 

METHODS  OF  EXPORTING 

1.  Variety  of  foreign-trade  methods. — The  foreign 
trade  of  a  country  is  the  composite  of  thousands  of 
individual  transactions,  varying  widely  as  regards 
the  methods  by  which  they  are  performed.  The  size 
of  the  exporting  firm,  the  volume  of  its  business,  the 
nature  of  the  goods  exported,  general  economic  con- 
ditions and  trade  traditions  in  the  exporting  and 
importing  countries,  the  customs  regulations  at  the 
ports  of  clearance  and  entry — these  are  among  the 
most  important  factors  that  have  to  do  with  the 
manner  in  which  foreign  trade  is  carried  on.  The 
export  manager  of  a  large  American  corporation 
expresses  the  following  opinion  in  regard  to  foreign- 
trade  methods: 

There  is  one  thing  which  it  seems  to  me  should  be  more 
impressed  upon  the  minds  of  manufacturers  who  are  think- 
ing for  the  first  time  of  going  into  foreign  markets.  It  is  the 
fact  that  they  cannot  sell  all  kinds  of  things  in  the  foreign 
markets,  or  in  small  or  large  quantities,  in  the  same  way. 
Every  man  who  is  going  into  the  export  field  has  a  problem 
in  the  organization  of  his  foreign  sales  that  is  particularly 
his  own,  and  he  had  better  study  it  out  before  he  goes  too 
far  in  other  directions.  We  do  not  handle  our  business  with 
the  same  kind  of  selling  organizations  everywhere.  There 
are  parts  of  the  world  where  we  have  our  own  representatives, 
acting  singly,  in  other  parts,  a  more  formal  organization  of 

84 


METHODS  OF  EXPORTING  85 

salesmen  under  local  managers.  In  some  countries,  however, 
we  have  found  it  best  to  sell  thru  local  agents  or  commission 
houses,  or  thru  large  wholesalers  with  whom  we  make  special 
arrangements.  Part  of  our  export  business  is  handled  for 
us  by  international  trading  companies. 

2.  Direct  and  indirect  methods. — There  are  two 
methods  of  dealing  with  foreign  customers,  the  direct 
and  the  indirect.  To  understand  what  is  meant  by 
the  terms  "direct"  and  "indirect,"  it  is  necessary  to 
keep  clearly  in  mind  what  part  of  the  exporting  proc- 
ess is  meant.  Exporting,  like  all  other  merchandis- 
ing, is  divided  into  three  main  groups  of  activity; 
marketing  (including  advertising,  corresponding  and 
selling),  financing  and  shipping.  We  refer  here  ex- 
clusively to  the  first  group,  marketing.  When  the 
direct  method  of  exporting  is  used,  the  foreign  cus- 
tomers are  reached  directly  thru  the  manufacturer's 
own  export  department,  and  no  use  is  made  of  the 
services  of  an  intermediary  outside  the  manufacturer's 
organization.  For  his  financing,  the  manufacturer 
may  need  the  supj)ort  of  a  banker,  and  he  may  avail 
himself  of  the  services  of  a  forwarding  agent  in  the 
actual  shipping  of  his  goods,  but  the  marketing  is  done 
by  the  manufacturer  himself. 

On  the  page  following  is  a  diagram  illustrating  di- 
rect and  indirect  methods  of  exporting.  As  this  chart 
shows,  there  are  several  methods  of  direct  exporting. 
The  manufacturer  can  reach  his  customer  thru  branch 
offices,  thru  salesmen  or  thru  advertising  and  corre- 
spondence. 


86 


FOREIGN  TRADE 


WITH 

THE  FOREIGN  MARKET 


METHODS  OF  EXPORTING  87 

3.  Export  department. — In  all  cases  the  manu- 
facturer who  enters  the  export  field  will  have  a  special 
export  department.  Our  giant  corporations  have 
found  it  desirable  to  organize  subsidiary  companies  to 
handle  all  their  foreign  business.  Examples  are  The 
United  States  Steel  Products  Company,  the  foreign 
sales  subsidiary  of  the  United  States  Steel  Corpora- 
tion ;  Bethlehem  Steel  Products  Company,  the  export 
subsidiary  of  the  Bethlehem  Steel  Company,  and  the 
United  States  Rubber  Export  Company,  which  is  the 
corresponding  subsidiary  of  the  United  States  Rubber 
Company.  Naturally,  only  a  great  corporation  which 
is  itself  composed  of  individual  companies  can  afford 
to  carry  the  overhead  expenses  of  such  an  organiza- 
tion. 

The  manufacturer's  exporting  department  may  be 
only  loosely  connected  with  the  home  organization, 
and  may  have  an  independent  export  manager,  who  is 
sometimes  responsible  to  the  directors  alone;  or  else 
it  may  be  "built  in" — that  is,  organized  in  such  a  way 
that  the  existing  office  and  clerical  forces  are  used  as 
much  as  possible  for  both  domestic  and  foreign  busi- 
ness. 

4.  Marketing  policy. — When  the  form  of  organiza- 
tion for  the  export  department  has  been  decided  upon, 
the  next  question  concerns  the  marketing  policy.  In 
the  case  of  a  worldwide  selling  campaign,  it  is  quite 
possible  that  every  available  method  must  be  used, 
since  different  markets  require  different  treatment. 
Some  parts  of  the  world  can  be  reached  only  thru 


88  FOREIGN  TRADE 

certain  trading  companies,  others  must  be  exploited 
thru  branch  houses,  and  still  others  by  mail.  Since 
there  are  very  many  varieties  of  marketing  methods 
that  are  practicable,  each  case  must  receive  careful 
consideration  with  respect  to  what  method  it  will  be 
best  to  use.  In  any  event,  practically  the  same  prin- 
ciples that  have  proved  successful  in  domestic  trade 
can  be  applied.  However,  a  few  suggestions  will 
prove  useful  for  guidance. 

5.  Branch  houses. — The  establishment  of  branch 
houses  is  an  undertaking  which  involves  a  large  out- 
lay of  capital,  causes  heavy  overhead  expense,  and 
pays  only  in  the  case  of  long-term  sales  campaigns. 
It  is  therefore  by  all  means  desirable  to  consider  most 
seriously  all  the  factors  involved  before  deciding  to 
establish  branch  houses.  A  number  of  our  pioneer 
export  corporations,  however,  such  as  the  Singer  Sew- 
ing Machine  Company,  the  Walkover  Shoe  Company, 
the  International  Harvester  Company,  the  United 
States  Steel  Products  Company,  the  Victor  Phono- 
graph Company,  have  employed  the  branch-house 
method  with  great  success.  Besides  large  capital 
backing,  a  prerequisite  of  this  method  is  a  firm  de- 
termination to  go  into  the  foreign  business  of  today 
with  the  idea  of  permanency,  and  not  merely  for  the 
purpose  of  taking  the  foreign  market  by  storm  in  some 
hasty  whirlwind  campaign. 

6.  Salesmen  abroad. — A  book  could  be  written  on 
the  subject  of  the  employment  of  American  salesmen 
abroad.     The  problem  is  complicated  by  the  fact  that 


J 


METHODS  OF  EXPORTING  89 

an  economic,  a  national  and  a  psychological  viewpoint 
are  essential.  The  greatest  possible  care  must  be 
taken  in  routing  the  salesmen  in  foreign  fields,  for  the 
distances  to  be  covered  are  so  gi'eat  that  faulty  routing 
may  result  in  greater  losses  than  in  the  case  of  domes- 
tic selling.  Moreover,  greater  patience  is  required 
than  in  selling  at  home,  for  it  is  often  a  long  time  be- 
fore results  are  perceptible.  And  finally,  in  selecting 
the  salesmen  the  concern  must  bear  clearly  in  mind  the 
conditions  peculiar  to  the  market  that  these  men  are  to 
serve. 

7.  Local  commission  agents. — The  local  commis- 
sion agent  differs  from  the  salesman  in  two  essential 
points.  The  first  is,  that  he  is  permanently  stationed 
in  a  given  territorj^  and  the  second  that,  being  a 
representative  of  a  number  of  concerns,  he  stands  out- 
side the  organization  of  the  exporting  manufacturer. 
Because  of  this  latter  fact,  we  cannot  accurately  say 
that  the  exporting  is  done  directly  when  such  a  man 
is  employed.  The  local  commission  agent  is  con- 
sidered at  this  point  in  order  that  we  may  compare 
him  with  an  exporting  concern's  agent  who  travels 
abroad.  The  local  commission  agent  who  lives  abroad 
has  a  marked  advantage  in  that  he  possesses  a  more 
thoro  knowledge  of  trade  and  financial  conditions  than 
the  traveling  salesman  can  secure  from  occasional 
visits.  The  limitation  of  the  local  man's  territory 
enables  him  to  become  intimately  acquainted  with  a 
wide  range  of  commodities  and  buyers.  As  a  rule, 
each  of  these  agents  is  granted  exclusive  rights  in  his 


90  FOREIGN  TRADE 

own  territory.  In  such  countries  as  Australia,  South 
Africa  and  China,  where  American  export  commis- 
sion houses  have  an  extremely  strong  hold  on  the  cus- 
tomers, the  local  commission  agent  confines  his  efforts 
to  the  securing  of  the  order  for  the  manufacturer 
whom  he  represents  and  handing  it  over  to  the  com- 
mission house  thru  which  his  customer  deals.  The 
commission  house  then  tends  to  the  execution  of  the 
indent  in  its  usual  way.  (The  term,  indent,  is  the 
technical  name  for  a  foreign  order.) 

The  local  commission  agent,  because  he  is  in 
intimate  contact  with  local  conditions,  and  because 
he  is  continually  on  the  spot,  can  take  advantage  of 
seasonal  changes  and  of  special  opportunities  that  may 
arise.  He  is  granted  the  right  to  make  the  selling 
prices  conform  to  special  conditions  and  opportunities. 
Because  he  keeps  in  close  touch  with  local  bankers, 
collection  attorneys,  and  credit-protection  associa- 
tions, the  local  commission  agent  is  well  able  to  pass 
judgment  in  regard  to  the  advisability  of  granting 
credit  to  those  who  apply  for  it.  He  can  assist  the  col- 
lection department  by  personal  requests  for  payment ; 
he  can  mediate  in  any  disputes  that  take  place 
between  the  firm  and  its  customers;  and  he  can  be 
made  the  receiver  of  stock  goods,  especially  spare 
and  repair  parts  for  mechanical  apparatus.  In  rare 
cases  this  local  agent  assumes  financial  risk  incident 
to  a  foreign  sale  by  virtually  guaranteeing  a  cus- 
tomer's account.  Under  such  circumstances  the  law 
designates  him  as  a  "del  credere"  agent. 


METHODS  OF  EXPORTING  91 

The  functions  and  duties  of  the  local  commission 
agent  abroad  differ  from  those  of  the  foreign  agent  as 
they  are  frequently  understood.  The  term,  foreign 
agent,  is  often  used  to  designate  a  foreign  merchant 
who  buys  independently  on  his  own  account,  and  who 
has  a  more  or  less  exclusive  right  in  a  given  territory 
to  handle  the  goods  which  he  buys.  For  him,  sales 
are,  of  course,  direct  sales. 

8.  Forwarding  agents. — Whether  he  sells  directly 
or  indirectly,  the  exporter,  in  order  to  facilitate 
shipment,  must  utilize  the  services  of  specialists  in 
the  shipping  line.  A  manufacturer  who  is  not  over- 
anxious to  develop  his  export  trade,  but  who  is  occa- 
sionally approached  concerning  an  order  by  a  firm 
abroad,  generally  employs  a  forwarding  agent  to 
attend  to  the  collection,  dispatch  and  clearance  thru 
the  customs  of  such  shipments.  ^Moreover,  the  thru 
bills  of  lading  that  can  be  obtained  from  this  country 
provide  for  the  shipment  of  goods  to  foreign  ports 
only.  If  the  buyer  is  inland,  abroad,  he  may  desire 
to  have  the  shipment  delivered  to  him  simply  "f.  o.  b. 
destination."  An  American  forwarding  concern, 
such  as  one  of  our  express  companies,  can  give  a  thru 
bill  of  lading  for  any  interior  point  in  the  world.  In 
foreign  countries  that  have  highly  developed  forward- 
ing agencies  of  their  own — England  and  Germany, 
for  example — the  interior  buyer  will  prefer  to  have 
the  goods  delivered  f .  o.  b.  to  the  port  and  will  attend 
personally  to  forwarding  them  inland. 

American  forwarding  concerns,  like  our  express 


92  FOREIGN  TRADE 

companies,  handle  a  great  volume  of  small  shipments 
which  all  move  in  the  same  direction,  but  which 
originate  with  different  manufacturers.  The  goods 
are  packed  together  and  combined  on  one  ocean  bill 
of  lading.  The  forwarder's  agent  divides  the  ship- 
ment at  the  port  of  discharge  for  delivery  to  the 
various  consignees.  The  fonvarding  agent  also 
attends  to  clearing  the  goods  thru  the  customs  of  the 
importing  countr}^  The  forwarder  thus  makes  possi- 
ble a  saving  in  freight  rates  and  the  obtaining  of  a 
thru  rate  to  the  interior  point  of  destination,  and,  in 
addition,  gives  valuable  service  in  clearance  at  the 
port  of  export  as  well  as  at  the  port  of  discharge. 

9.  Freight  broker. — Services  similar  to  those 
performed  by  the  forwarding  agent  at  the  port  of 
shipment  are  also  performed  bj'^  a  freight  broker  at 
the  American  port.  To  him  are  consigned  the  export 
goods  from  the  interior  points  where  the  orders 
originated.  He  pays  the  necessary^  dock  charges, 
takes  out  an  ocean  bill  of  lading,  clears  the  shipment 
and  sees  that  it  is  put  promptly  on  board  the  steamer 
for  which  it  is  booked.  The  freight  broker  is  paid  by 
the  shipping  companj^-  for  which  he  works  a  commis- 
sion on  the  amount  of  freight  that  he  delivers  for  that 
company. 

10.  Parcel  post. — The  parcel  post  renders  valuable 
service  in  direct  trading.  It  is  especially  adapted  to 
the  delivery  of  small  trial  orders,  samples,  repair  parts 
and  small  articles  urgently  needed.  It  is  particularly^ 
useful  to  a  concern  that  deals  with  customers  in  the 


METHODS  OF  EXPORTING  93 

out-of-the-way  corners  of  the  world.  In  the  matter 
of  parcel  post  connections,  the  American  exporter  is 
seriously  hampered  in  competing  with  his  European 
commercial  rivals.  From  England,  Germany,  Hol- 
land and  Belgium,  merchandise  can  be  forwarded  by 
post,  c.  o.  d.,  to  the  most  remote  countries,  at  low 
cost  to  the  buyer  and  with  little  risk  to  the  seller.  An 
American  cannot  send  goods  by  mail  c.  o.  d.  to  a 
single  foreign  country,  or  even  to  the  Philippines. 
The  American  government  has  so  far  failed  to  furnish 
parcel  post  connection  of  any  sort  with  Cuba, 
Roumania,  Bulgaria,  the  greater  part  of  India,  Siam, 
the  Malay  States  and  the  Straits  Settlements  of  Asia. 
Likewise  in  Canada  there  are  no  arrangements  under 
which  parcels  must  be  sent  by  mail  c.  o.  d.  to  any 
place  in  Canada  or  in  any  other  country. 

This  condition  is  a  serious  handicap  to  the  small 
exporter.  The  larger  exporter  sometimes  solves  the 
problem  by  consolidating  a  number  of  small  parcel- 
post  shipments  into  one  single  freight  shipment,  for- 
warding this  to  the  foreign  countries  that  have  ade- 
quate parcel-post  facilities,  and  having  the  parcel- 
post  shipments  unpacked  and  distributed  there.  The 
export  manager  of  a  large  mercantile  establishment 
in  Chicago  gives  the  following  description  of  a  method 
employed  by  his  firm : 

By  reason  of  the  volume  of  our  business  we  have  been  able 
to  effect  an  arrangement  whereby  we  forward  to  Liverpool 
three  times  a  week  a  bale  of  packages  already  wrapped  and 
addressed  to  places   with  which  the  United  States  has  no 


94  FOREIGN  TRADE 

parcel  post  connection.  At  Liverpool  the  mail  is  opened  and 
the  parcels  are  deposited  in  the  British  post  by  our  agent. 
This  arrangement  gives  us  an  advantage  over  casual  ship- 
pers, who  must  rely  upon  the  high  charges  and  unsatisfactory 
service  of  forwarding  concerns. 

It  is  certainly  not  right  that  British  wares  can  be 
sent  by  the  London  competitors  of  American 
exporters  to  the  Philippines,  Hawaii  and  Alaska  by 
post,  but  that  American  goods  cannot  be  sent  by  mail 
to  the  islands  under  British  control  in  the  same  part 
of  the  world.  Our  Pacific  possessions  are  free  to 
British  merchants,  but  Great  Britain's  Pacific  Islands 
are  closed  to  us.  The  extension  of  our  parcel  post 
facilities  is  one  of  the  most  urgent  tasks  that  our  gov- 
ernment has  to  perform. 

11.  Selling  hy  mail. — The  salesmen's  weapon  is 
**the  spoken  word."  His  sales  talk,  which  is  built 
about  a  concrete  fact,  is  a  case  in  point.  Salesmen 
are  usually  aided  by  the  wi'itten  word  (corre- 
spondence) and  the  printed  word  (catalogs  and 
advertising).  In  certain  cases,  particularly  in  the 
marketing  of  low-priced  specialties,  thruout  the  entire 
sales  campaign  these  two  instruments  are  used  exclu- 
sively. In  other  words,  no  personal  salesmen  are 
employed.  The  term,  "all-mail"  campaign  applies 
under  such  circumstances. 

12.  Indirect  exporting. — Even  if  the  American 
exporter  decides  to  turn  over  to  others  the  task  of 
pushing  his  sales  abroad,  he  is  by  no  means  freed  from 
the  responsibility  of  strictly  supervising  the  work  that 


METHODS  OF  EXPORTING  95 

is  done.  No  manufacturer  or  exporter  can  afford  to 
rely  absolutely  upon  the  zeal  and  ability  of  those  who 
are  not  directly  and  exclusively  working  for  him.  If 
anyone  thinks  that  he  can  simply  turn  his  export  busi- 
ness over  to  professional  exporters  and  draw  profits 
from  the  efforts  of  others  he  is  probably  doomed  to 
disappointment. 

13.  Position  of  the  middleman. — In  many  cases  the 
world-wide  tendency  toward  the  elimination  of  the 
middleman  is  carried  too  far.  There  is  danger  of 
swinging  from  one  extreme  to  the  other.  It  is  as 
wrong  to  believe  that  the  aid  of  others  is  always  to 
be  spurned,  as  it  is  to  rely  entirely  upon  it.  The 
middleman,  whether  agent  or  merchant,  is  not 
"everything,"  yet  he  fills  his  place,  a  place  which  no 
one  else  can  occupy  without  the  smoothness  and 
efficiency  of  the  mechanism  of  foreign  trade  being 
diminished.  The  middleman  is  not  a  "parasite  on  the 
trade,"  not  a  "leech  on  the  factory,"  his  profit  is  not 
"a  tribute  akin  to  blackmail."  The  fundamental 
principles  of  economics,  upon  which  are  based  the 
division  of  labor  and  the  resulting  specialization  of 
occupations,  justify  the  existence  of  various  types  of 
middlemen  in  the  foreign  trade,  just  as  they  warrant 
the  division  of  the  manufacturing  process  into 
manifold  partial  performances.  When  the  manu- 
facturer has  introduced  his  goods  effectively  in  a 
foreign  market,  if  he  has  large  sales  and  a  good  capital 
backing,  if  by  long  experience  and  by  the  possession 
of  a  very  capable  export  organization  he  is  fitted  to 

XV— 8 


96  FOREIGN  TRADE 

deal  with  the  difficulties  connected  with  foreign 
shipping,  he  is  wise  if  he  eliminates  all  middlemen  and 
adopts  the  method  of  direct  trading.  But  such  cases 
are  rare  exceptions.  As  a  rule,  the  foreign  market 
needs  constant  attention,  and  consequently,  unless  the 
conditions  mentioned  above  prevail,  the  manufacturer 
can  accomplish  more  by  employing  professional 
exporters  than  by  depending  upon  either  his  own 
export  department  or  upon  foreign  branches. 

14.  Early  merchants  replaced  by  agents. — The 
larger  part  of  our  export  trade  is  handled  thru  middle- 
men, who  are  generally  known  as  exporters  and  im- 
porters. If  they  buy  and  sell  on  their  own  account, 
they  are  properly  called  merchants.  If  they  act  only 
upon  orders  from  abroad,  and  if  they  receive  their 
pay  in  the  form  of  a  commission  from  the  foreign 
buyers  they  are  generally  called  commission  mer- 
chants. They  are  known  as  export  agents  if  they 
receive  a  commission  from  the  exporting  manufac- 
turers in  the  United  States.  In  theory,  these  dis- 
tinctions may  be  drawn  rather  closely,  but  in  practice 
the  field  of  each  class  overlaps  that  of  the  other. 

Our  export  trade,  then,  is  carried  on  both  by  agents 
and  by  merchants  who  buy  on  their  own  account  and 
at  their  own  risk.  The  earlier  American  exporters 
were  merchants.  In  England  and  Germany  the  mer- 
chant system  figures  prominently  in  foreign  trade. 
Of  recent  years  in  the  United  States,  not  the  mer- 
chant but  the  export  commission  house  has  been  the 
dominating  figure  in  our  trade.    In  New  York  alone . 


METHODS  OF  EXPORTING  97 

there  are  over  six  hundred  such  houses,  and  still  others 
are  situated  in  the  other  important  seaports  of  the 
country.  Some  of  them  have  acquired  great  magni- 
tude, prestige  and  influence,  and  have  become  indis- 
pensable in  the  development  of  our  foreign  trade. 
Less  than  twelve  of  these  concerns  handle  one-fourth 
of  the  entire  export  trade  of  the  United  States;  two 
control  half  our  trade  with  China;  and  probably  be- 
tween 60  and  70  per  cent  of  all  the  export  trade  of  the 
country  is  under  the  direct  control  of  these  middle- 
men. 

15.  Position  of  the  export  commission  house. — The 
relation  between  the  manufacturer  and  the  export 
commission  house  has  been  the  subject  of  much  dis- 
cussion for  many  years.  A  strenuous  eiFort  has  been 
made  to  wrest  from  the  commission  house  some  of  the 
influence  that  it  exerts  over  our  foreign  trade — an 
effort  which  is  strictly  in  keeping  with  the  general 
tendency  to  eliminate  the  middleman.  To  be  sure, 
the  growth  of  our  manufacturing  corporations  and 
the  expansion  of  our  export  trade  justifies  the  manu- 
facturer, in  certain  cases,  in  dispensing  with  the  serv- 
ices of  the  commission  house.  But  while  it  is  true  that 
some  of  these  houses  have  been  guilty  of  irregular 
practices,  it  should  be  said  in  their  defence,  that  the 
overwhelming  majority  strenuously  oppose  any  deal- 
ings that  are  at  all  questionable.  A  just  opinion  of 
the  worth  of  the  commission  house  can  be  based  only 


98  FOREIGN  TRADE 

upon  a  thoro  knowledge  of  their  position,  the  nature 
of  their  service  and  the  methods  which  they  employ. 

16.  Definition  of  the  commission  house. — It  is 
almost  impossible  to  give  an  accurate  general  defini- 
tion of  the  export  commission  house,  since  the  spheres 
of  activity  covered  vary  with  different  houses.  Con- 
sequently, it  is  hard  to  discriminate  between  the  es- 
sential and  the  incidental  characteristics  of  this  type 
of  business  enterprise.  In  its  simplest  form,  a  com- 
mission house  is  a  firm  that  acts  as  buyer  for  foreign 
customers — merely  executing  their  orders  and  charg- 
ing for  its  services  a  certain  rate  of  commission.  This 
definition  describes  only  the  essential  features  com- 
mon to  all  commission  houses.  How  greatly  these 
institutions  differ  in  other  respects  is  apparent  from 
the  following  statement  concerning  exporters,  made 
by  Gustav  Vintscher,  the  president  of  one  of  the 
largest  New  York  exporting  houses,  the  Markt  and 
Hammacher  Company: 

There  is  a  difference  between  exporter  and  exporter.  We 
have  those  who  work  on  antiquated  lines,  sit  behind  their 
office  desks  with  nothing  more  than  an  office  expenditure, 
wait  for  indents  from  their  clients  to  bring  what  they  ask 
for,  charge  a  small  commission  for  financing,  and  then  are 
done  with  the  business.  There  are  exporters  who  are  live 
and  are  progressive,  who  have  their  traveling  men  all  over 
creation  carrying  extensive  sets  of  samples.  There  are  ex- 
porters who  even  carry  stock  in  different  parts  of  the  world, 
and  so  to  speak,  take  the  position  of  the  manufacturer's 
foreign  agent. 

17.  Commission   house   as    merchant. — When   an 


METHODS  OF  EXPORTING  99 

exporter  carries  his  own  stock  of  goods  he  is  no  longer 
a  commission  merchant,  but  a  merchant.  Today 
there  are  very  few  merchants,  pure  and  simple,  among 
the  American  exporters,  tho  some  of  the  latter 
occasionally  assume  the  character  of  merchants  in  con- 
nection with  certain  lines  and  a  limited  market — for 
example,  when  market  conditions  render  the  carrying 
of  stock  advisable  or  necessary.  In  some  markets,  the 
combination  of  commission  merchant  and  merchant  is 
tabooed.  Mr.  Welding  Ring  says  that  Australians 
would  not  deal  with  an  export  commission  house 
which,  while  serving  them,  at  the  same  time  traded 
on  its  own  account,  because,  they  assert,  these  two 
branches  cannot  be  conducted  in  harmony. 

It  should  be  borne  in  mind  that  whenever  a  commis- 
sion house  acts  in  the  capacity  of  a  merchant — in  other 
words,  whenever  it  buys  goods  without  being  ordered 
to  do  so  by  a  foreign  buyer,  and  with  the  intention  of 
selling  them  at  a  higher  price  than  it  paid,  it  has  no 
right  to  ask  a  commission.  Whenever  a  commission 
is  charged,  the  merchant  no  longer  acts  merely  as  a 
buyer  or  a  seller.  So  any  other  profits,  such  as 
"private  discounts,"  are  considered  by  the  trade 
"irregular  and  calculated  to  deceive  clients." 

18.  Advantages  offered  by  the  commission  house  to 
the  foreign  buyer. — The  export  commission  house 
could  not  have  acquired  its  present  significance  and 
influence  if  those  who  used  its  services  had  not  derived 
advantages  from  it.     There  are  two  distinct  classes 


100  FOREIGN  TRADE 

that  the  export  commission  house  serves:  the  foreign 
buyer  and  the  exporting  manufacturer. 

First,  the  advantages  that  the  foreign  buyer  secures 
from  deahng  thru  an  export  commission  house  should 
be  considered.  The  chief  advantage  is  a  general 
simplification  of  transactions.  Instead  of  correspond- 
ing with  fifteen  manufacturers  located  at  various 
places,  he  writes  a  letter  to  one  commission  firm,  com- 
bining many  orders  in  that  one  letter.  After  the 
commission  house  has  distributed  the  respective  orders 
to  the  various  manufacturers  and  collected  their  goods 
in  one  consolidated  shipment,  one  bill  of  lading  is  made 
out  and  one  draft  is  drawn  on  the  buyer.  Instead  of 
there  being  the  necessity  of  making  out  shipping 
documents  such  as  insurance  papers,  consular  invoices 
and  the  hke,  for  each  order,  it  is  necessaiy  only  to 
make  up  one  set  for  the  entire  shipment.  There  is  a 
consequent  saving  in  postage,  clerical  work,  and 
freight  and  port  charges.  Then,  too,  the  export  com- 
mission house,  since  it  is  in  close  touch  with  manu- 
facturers, can  often  secure  the  latest  style  of  goods  on 
the  market.  It  can  act  as  intermediary  between  the 
manufacturer  and  the  buyer,  and,  when  complaints 
are  made,  can  materially  assist  in  adjusting  them. 
The  export  commission  house  frequently  finances  the 
foreign  buyer.  It  draws  on  him  a  sixty  to  ninety-day 
draft,  in  other  words,  grants  him  long-term  credit, 
which  the  manufacturer  is  unwilling  to  do. 

These  advantages  are  not  appreciated  equally  in 


! 


METHODS  OF  EXPORTING  101 

different  parts  of  the  world.  European  importers, 
for  instance,  generally  dislike  to  deal  thru  American 
export  commission  houses,  and  many  South  American 
concerns  also  prefer  not  to  do  so.  Importers  in  Aus- 
tralia, South  Africa  and  the  far  East,  on  the  other 
hand,  freely  make  use  of  the  foreign  export  commis- 
sion house  in  dealing  with  foreign  countries. 

19.  Advantages  offered  by  commission  house  to 
exporting  manufacturer. — The  advantages  that  the 
export  commission  house  offers  to  the  exporting  manu- 
facturer are  of  various  kinds.  They  lie  largely  in  the 
trade  connections  which,  by  long  and  constant  effort 
and  by  the  use  of  a  variety  of  methods,  the  commission 
house  has  established  in  various  markets.  Few  manu- 
facturing corporations  can  afford  to  develop  and  main- 
tain an  export  organization  as  efficient  as  that 
possessed  by  most  commission  houses,  to  sell  the 
products  of  hundi-eds  of  manufacturers  and  to  repre- 
sent large  buyers  who  carry  on  transactions  in  great 
markets.  But  the  commission  house  is  in  a  position 
to  distribute  economically  and  effectively  the  large 
output  of  one  factory  over  a  wide  territory,  and  to 
combine  the  exportable  surplus  of  a  number  of 
factories  and  place  it  where  the  demand  exists. 

Besides  the  ability  to  create  the  demand  that 
governs  the  distribution,  incidental  to  selling,  the  com- 
mission house  offers  other  inducements  to  the  manu- 
facturer. It  pays  cash  for  goods,  and  in  so  doing 
takes  upon  itself,  the  uncertainty  of  the  credit 
arrangement  that  is  made  between  the  American  seller 


102  FOREIGN  TRADE 

and  the  foreign  buyer.  The  following  illustration 
will  make  clear  what  has  just  been  said:  Exchange 
with  Brazil  during  the  year  1914  varied  so  widely  that 
at  times  the  extension  of  credit  to  a  Brazilian  buyer 
would  have  meant  the  payment  of  $100,000  that  he 
owed  and  would  have  required  $125,000  in  value  in 
Brazilian  paper  money  at  the  time  the  bill  became  pay- 
able. Under  such  conditions,  how  much  chance  would 
there  be  for  an  independent  exporter  to  get  full  pay- 
ment, indeed  any  at  all? 

20.  Efforts  of  the  exporter  to  support  the  commis- 
sion house. — In  many  cases,  even  if  a  commission 
house  handles  the  export  business  of  a  manufacturer, 
the  latter  will  find  it  advantageous  to  build  up 
auxiliary  advertising  and  selling  campaigns.  The 
advertising  is  usually  left  entirely  to  the  individual 
American  exporter.  Frequently,  the  American  ex- 
porter sends  special  sales  representatives  to  travel 
with  the  salesmen  of  the  export  commission  house,  to 
teach  them  how  to  sell  the  exporter's  goods.  In  such 
cases  the  representative  of  the  exporter  is  known  as 
a  "specialty  salesman." 

21.  Relation  of  the  commission  house  to  the  foreign 
agents. — In  some  markets  the  export  cormnission 
house  is  the  most  efficient  selling  force,  while  in  others 
exclusive  foreign  agents  bring  the  best  results. 
Manufacturers  frequently  employ  the  services  of  both 
in  selling  their  product  abroad.  Care  must  be  taken 
to  secure  a  proper  coordination  of  the  two  agencies. 
No  firm  should  sell  thru  a  commission  house  to  a  terri- 


METHODS  OF  EXPORTING  103 

toiy  that  has  been  reserved  for  an  exclusive  foreign 
agent.  It  must  be  insisted  that  the  commission  house 
give  sufficient  information  concerning  the  destination 
of  the  goods  it  sells  to  supply  the  exclusive  agent 
adequate  protection. 

22.  Recent  inroads  in  the  field  of  the  commission 
house. — Of  late,  the  export  commission  house  has 
been  losing  some  ground,  partly  on  account  of  the 
world-wide  tendency  to  eliminate  the  middleman  and 
partly  because  of  the  change  in  the  nature  of  our  for- 
eign trade.  Since  staple  commodities  constitute  the 
mainstay  of  the  commission  house  business,  the  in- 
creased specialization  in  our  manufactured  exports 
has  limited  the  sphere  of  the  export  commission  house 
and  consequently  caused  it  to  lose  ground.  The  com- 
mission house  has  been  hurt  also  by  the  development 
of  certain  great  American  corporations  into  organiza- 
tions of  world-wide  influence  which,  only  in  excep- 
tional cases,  employ  the  services  of  outsiders  to  de- 
velop their  foreign  business. 

It  is  said  that  an  increase  in  the  volume  of  special- 
ties handled  does  not  compensate  the  commission  house 
for  the  loss  of  its  staple  business.  Such  a  house  can 
make  more  money  by  accepting  as  small  a  commission 
as  one  per  cent  on  staple  commodities  than  by  insisting 
on  receiving  five  or  ten  per  cent  on  specialties.  The 
explanation  is  said  to  lie  in  the  handling  of  staples.  A 
large  order  for  cotton-piece  goods,  the  record  of  which 
fills  only  one  line  in  the  ledger,  is  relatively  more  prof- 
itable than  an  equally  large  order  for  miscellaneous 


104  FOREIGN  TRADE 

hardware,  the  hsting  of  which  fills  many  pages  of  the 
ledger. 

23.  New  services  of  the  export  commission  house. 
— To  forestall  further  loss  in  their  share  of  the  na- 
tion's trade,  the  commission  houses  are  giving  more 
and  more  attention  to  a  branch  of  activities  which  is 
not  exclusively  their  own — namely,  the  introduction 
of  new  American  goods.  Some  difficulty  is  experi- 
enced in  this  connection  owing  to  the  fact  that  the  real 
function  of  the  commission  house  is  not  to  help  to  in- 
troduce American  commodities  but  to  enable  the  for- 
eigner to  make  the  wisest  possible  selection  of  them. 

In  order  both  to  introduce  new  lines  and  to  keep 
in  close  touch  with  its  foreign  clientele,  the  large  com- 
mission house  maintains  an  organization  in  the  foreign 
market ;  this  may  be  in  the  form  of  a  branch  house,  a 
local  agency  or  a  force  of  traveling  salesmen. 

24.  Limitations  of  the  commission  house  service. 
— From  the  foregoing  discussion,  it  is  evident  that  the 
sphere  of  the  commission  house  is  by  no  means  un- 
limited. It  is  seldom  advisable  to  appoint  an  indi- 
vidual commission  house  as  an  exclusive  agent,  for 
while  its  clientele  might  be  strong,  and  while  its  clien- 
tele might  be  enlarged  by  means  of  effective  advertis- 
ing and  selling  campaigns,  we  must  keep  in  mind  that 
no  commission  house  possesses  a  monopoly  in  any 
foreign  territory,  and  that  it  would  therefore  be 
unwise  to  shut  oneself  off  from  the  buyers  who  habit- 
ually purchase  thru  other  American  commission 
houses  operating  in  the  same  territory.     Moreover, 


METHODS  OF  EXPORTING  105 

the  manufacturer  should  himself  strive  to  create  a 
demand  for  his  goods,  and  not  merely,  trust  matters 
to  the  commission  house.  Mr.  Kies  of  the  National 
City  Bank  of  New  York,  makes  this  requirement  clear 
in  the  following  statement: 

I  want  to  emphasize  this  point  to  the  manufacturer  who 
is  starting  in  the  field  for  the  first  time,  that  the  export  house 
gives  an  opportunity  to  do  business  with  the  least  trouble 
and  expense  to  himself.  It  is  up  to  the  manufacturer,  how- 
ever, to  build  up  the  demand  for  his  particular  product.  If 
the  manufacturer,  by  judicious  advertising  and  promotion 
work,  will  open  up  a  market  for  his  goods,  he  can  very  read- 
ily rid  himself  of  the  other  troubles  in  connection  with  the 
export  business  by  utilizing  the  services  of  the  export  house. 

There  are  various  agency  services  at  the  disposal 
of  the  manufacturer  who  wishes  to  avoid  the  media- 
tion of  the  commission  house,  principally  the  services 
of  the  merchant  and  of  the  manufacturer's  agent. 

25.  Merchant  system;  loaning  cajntal  to  foreign 
importers. — In  the  United  Kingdom  and  Germany, 
the  merchant  system  is  stronger  than  it  is  anywhere 
else.  There  is  considerable  difference  between  the 
methods  employed  by  the  export  merchant  of  London 
and  Hamburg  respectively.  The  British  export  mer- 
chant is  practically  a  financier,  and  he  loans  his  capital 
for  orders.  Such  a  British  house,  for  example, 
decides  to  place  £50,000  sterling  in  South  Africa. 
Certain  importers  who  are  thoroly  well  known  to  the 
principals  are  given  varying  credits — £15,000  to  one, 


106  FOREIGN  TRADE 

£10,000  to  another,  etc.  These  (South  African) 
importers  order  from  England  such  goods  as  they 
please.  Their  bills  are  paid  by  the  British  export 
merchant,  but  the  latter  does  not  interest  himself  in 
the  character  or  the  source  of  the  goods  ordered.  He 
simply  restricts  the  amount  of  money  which  he  is 
willing  to  advance  for  each  customer,  who  is  obligated 
to  that  amount  by  interest-bearing  notes  or  other 
securities. 

The  German  export  merchant,  on  the  other  hand, 
usually  loans  his  money  on  goods  which  he  sells  him- 
self. He  is  anxious  to  tie  his  foreign  customers  to 
him  by  keeping  the  origin  of  the  commodity  sold  con- 
cealed from  the  buyer.  For  that  purpose,  all  marks 
of  origin  are  removed  from  the  goods,  which  are  re- 
packed and  marked  with  the  export  merchant's  own 
signs  of  shipment. 

It  is  believed  in  some  quarters  that  the  export  mer- 
chant will  play  a  more  important  part  in  the  future 
of  the  American  export  trade  than  he  has  in  the  past. 
The  difficulties  of  the  export  commission  house  on  the 
one  hand,  and  the  narrowing  of  the  margin  of  profit 
generally  experienced  in  American  business,  will  call 
the  export  merchant  to  the  front.  The  necessity  for 
more  liberal  credit,  granted  by  American  exporters, 
will  tend  towards  a  change  in  the  same  direction.  A 
closer  cooperation  between  the  American  exporting 
manufacturer  and  the  exporting  merchant  will  do 
much  towards  aiding  in  the  exploitation  of  foreign 
fields,  which  today  are  largely  left  almost  uncontested 


METHODS  OF  EXPORTING  107 

to  the  European  competitor.  This  may  be  true,  par- 
ticularly of  our  export  trade  in  cotton  piece-goods. 

26.  Manufacturer's  agent. — The  commission  house, 
as  we  have  seen,  is  primarily  the  representative  of  the 
foreign  buyer,  and  not  of  the  exporting  seller.  The 
merchant,  on  the  other  hand,  is  nobody's  representa- 
tive. He  buys  where  he  pleases  and  sells  where  he 
pleases,  and  is  governed  only  by  his  desire  to  serve 
his  own  best  interests — in  other  words,  his  aim  is  to 
pay  the  lowest  and  to  obtain  the  highest  possible 
price. 

It  is  not  surprising  to  find  that  a  third  agent  is 
rapidly  assuming  a  position  of  importance;  namely, 
the  manufacturer's  agent.  The  function  of  this  agent 
is  like  that  of  a  commission  house.  The  agent  exerts 
just  as  much  effort,  and  uses  fully  as  much  skill  to 
obtain  the  best  markets  for  the  products  ©f  the  export- 
ing manufacturer,  as  the  export  commission  house 
does  to  find  the  most  advantageous  sources  of  supply 
with  which  to  fill  the  indents  received  from  the 
foreign  buyer.  Each  of  those  agents  usually  special- 
izes in  a  particular  line  and  represents  a  large  number 
of  manufacturers. 

The  new  type  of  export  commission  men  has  good 
prospects  in  view  of  the  fact  that  American  exports 
are  undergoing  a  momentous  transition  from  the 
status  of  self-selling  staples  to  that  of  manufactures, 
for  the  disposal  of  which,  because  of  their  competi- 
tive nature,  a  vigorous  sales'  campaign  is  absolutely 
necessary. 


108  FOREIGN  TRADE 

27.  Canadian  practice. — Generally  speaking,  all 
that  has  so  far  been  said  in  this  chapter  applies  to 
Canada  as  well  as  to  the  United  States.  The  differ- 
ent methods  of  exporting,  the  different  types  of  mid- 
dlemen, and  the  pros  and  cons  on  each  point  are  more 
or  less  the  same  for  both  countries.  It  will  only  be 
necessary  to  note  a  few  points  of  difference  due  to  lack 
of  experience  in  export  trade,  and  to  give  a  general 
picture  of  conditions. 

As  in  the  United  States,  a  nimiber  of  the  larger 
concerns  have  their  own  branch  houses  or  agencies 
abroad.  These  are  the  firms  that  blazed  the  trail  for 
the  export  of  manufactured  articles  to  foreign  mar- 
kets. Most  of  the  large  agricultural  implements 
companies  and  some  of  the  large  iron  and  steel  com- 
panies have  adopted  this  method. 

Quite  a  number  of  companies  in  various  lines  of  in- 
dustry employ  their  own  traveling  salesmen  in  the 
leading  markets.  Sometimes  two  or  three  allied  con- 
cerns,  for  instance  in  the  implement  trade,  become 
jointly  responsible  for  the  maintenance  of  these  sales- 
men. 

A  good  deal  of  Canada's  foreign  trade  and  a  rather 
larger  proportion  than  in  the  case  of  the  United 
States — is  negotiated  by  mail,  the  result  of  the  send- 
ing of  catalogs,  the  chance  reading  of  advertise- 
ments and  considerable  correspondence.  The  larger 
proportion  in  the  case  of  Canada  is  due  to  the  fact 
that  so  much  of  our  trade  is  of  the  casual  sort,  too 
many  Canadian  manufacturers  in  the  past  regarding 


METHODS  OF  EXPORTING  109 

the  foreign  market  as  merely  a  good  outlet  for  an 
occasional  surplus  due  to  a  depression  in  the  home 
market. 

28.  Commission  houses  in  Canadian  trade. — It  is 
probably  true  that  the  majority  of  Canadian  export- 
ers deal  thru  commission  houses  or  thru  local  com- 
mission agents  in  the  foreign  markets.  Unfortu- 
nately there  are  only  a  few  Canadian  commission 
houses  doing  business  overseas,  and  these  are  for  the 
most  part  engaged  in  the  foodstuffs  and  provision 
trades  which,  like  the  lumber  trade,  are  staple  and 
well-organized. 

An  increasing  number  of  Canadian  firms  are  form- 
ing connections  with  local  commission  agents  in  the 
export  countries.  This  is  the  practice  recommended 
most  frequently  by  Canadian  Trade  Commissioners 
abroad.  Care  must  be  taken,  however,  to  secure  only 
responsible  agents. 

REVIEW 

Enumerate  and  describe  the  different  methods  of  dealing  di- 
rectly and  indirectly  with  the  foreign  market. 

What  advantages  does  an  exporting  manufacturer  obtain  from 
branch  offices  ? 

State  the  nature  of  the  work  of  a  foreign  local  agent  and  the 
advantage  of  employing  him. 

What  is  the  role  of  the  forwarding  agent,  and  what  services 
does  he  render  ? 

In  what  respect  are  we  at  a  disadvantage  in  parcel  post  facili- 
ties compared  with  foreign  nations  ? 

Describe  indirect  exportation  thru  export  merchants,  thru 
commission  houses  and  thru  manufacturers'  export  agents.  Dis- 
tinguish particularly  between  the  last  two. 


CHAPTER  VI 

COOPERATION  IN  FOREIGN  TRADE 

1.  Need  of  cooperation. — It  has  been  pointed 
out  at  various  places  in  this  Text  that  our  exports  of 
manufactured  articles — specialties  and  staples — are 
increasing  in  number.  Of  these,  staples  are  the  more 
competitive  by  nature.  Their  sale  in  foreign  mar- 
kets meets  the  severest  competition,  a  competition 
which  it  is  extremely  hard  for  the  American  exporter 
to  overcome  because  the  laws  of  the  United  States 
place  him  at  a  disadvantage  as  compared  with  his 
foreign  competitors.  The  most  conspicuous  handi- 
cap of  the  American  manufacturer  or  merchant  who 
enters  the  race  with  these  competitors  is  his  inability 
to  combine  or  to  cooperate  with  others  as  his  foreign 
rival  does. 

It  seems  strange  that  uncertainty  as  to  his  legal 
status  compels  the  American  producer  to  indulge  in 
cut-throat  competition  with  his  neighbors  in  order  to 
market  his  products  in  foreign  countries.  This  state 
of  affairs  is  proving  a  serious  obstacle  to  the  efforts 
that  are  being  made  at  present  to  increase  the  foreign 
trade  of  this  country.  It  forces  the  American 
exporter  to  meet  single-handed  the  strong  combina- 
tions that  exist,  not  only  among  his  foreign  selling 

110 


COOPERATION  111 

competitors,  but  also  among  the  buyers  of  many  of 
our  staple  commodities.  An  organized  foreign  de- 
mand is  allowed  to  control  our  widely  scattered  sup- 
ply. England  permits  combinations  that  our  Sher- 
man Anti-Trust  Law  declares  unlawful;  France  en- 
courages such  combinations;  and  Germany  goes  even 
further  by  sometimes  actually  compelling  its  citizens 
to  enter  into  them,  as  the  history  of  the  Potash  Syn- 
dicate proves. 

2.  European  methods. — Not  satisfied  with  encour- 
aging the  expansion  of  foreign  trade  by  building  up  a 
powerful  merchant  marine,  by  creating  an  effective 
system  of  branch  banks,  and  by  investing  billions  of 
dollars  in  foreign  markets,  the  leading  commercial 
countries  of  Europe — and  to  a  lesser  extent  Japan — 
have  perfected  foreign  sale  organizations  that  make  it 
possible  for  the  members  to  combine  their  efforts  ef- 
ficiently in  both  domestic  and  foreign  trade. 

In  a  summary  of  the  report  of  the  Federal  Trade 
Commission  which  is  entitled  "Cooperation  in  Amer- 
ican Export  Trade,"  the  situation  in  the  most 
important  commercial  countries,  as  regards  export 
combination  and  cooperation,  is  described  as  follows: 

In  Germany,  prior  to  the  war,  there  were  600  important 
cartels,  i.e.,  combinations  to  control  the  market,  embracing 
practically  every  industry  in  the  P^nipire.  iVIany  dominated 
the  export  trade  of  their  industries  and  carried  on  vigorous 
campaigns  to  extend  their  foreign  business,  to  prevent  cojn- 
petition  among  German  producers  in  foreign  markets,  and 
to  secure  profitable  prices.  Thus  the  German  dye-color  in- 
dustry operated  as  a  unit  in  foreign  trade  under  the  leader- 

XV— 9 


112  FOREIGN  TRADE 

ship  of  two  great  groups  of  allied  producers,  the  Badische 
group  and  the  Hochst-Casella  group,  which  were  working 
under  agreement  to  avoid  competition  between  themselves  for 
50  years.  The  manufacture  and  exportation  of  electrical 
equipment  has  been  made  one  of  the  bulwarks  of  German  for- 
eign trade  by  two  great  companies,  the  Allgemeine  Elek- 
tricitates  Gesellschaft  and  the  Siemens-Schuckert,  with  nu- 
merous subsidiaries  at  home  and  abroad  working  in  harmony 
with  each  other.  Half  of  the  $150,000,000  worth  of  coal 
and  coke  exported  annually  was  sold  by  one  central  selling 
agency,  maintained  by  the  great  Rheinisch-Westfalische  coal 
syndicate,  of  which  the  Prussian  Government  mines  are  mem- 
bers, and  which  embraces  the  bulk  of  all  the  coal  and  coke 
production  of  the  Empire.  Practically  all  the  rapidly  in- 
creasing and  highly  valuable  iron  and  steel  export  business 
was  handled  by  the  single  selling  agency  of  the  Stahlwerks 
Yerband,  the  aggressive  union  of  German  iron  and  steel  man- 
ufacturers which  has  actively  fostered  foreign  business  thru 
export  bounties  and  other  means. 

In  France  and  Belgium,  syndicates  of  iron  and  steel,  coal, 
glass,  and  other  industries  were  strong  factors  in  domestic 
and  foreign  trade.  Silk-ribbon  manufacturers  of  France 
and  Germany  conducted  their  export  trade  in  accordance 
with  a  joint  agreement.  In  Italy,  Russia,  Austria-Hungary, 
Switzerland,  Sweden,  Greece,  Argentine,  Chile  and  Ecuador, 
central  organizations  unite  the  interests  of  producers  in  va- 
rious industries  such  as  coal,  iron,  and  steel,  agricultural 
machinery,  oil,  sulphur,  superphosphates,  cement,  matches, 
chocolate,  embroidery,  silk  goods,  watches,  cotton  goods, 
condensed  milk,  canned  fish,  currants,  quebracho,  iodine, 
iiacao,  etc. 

In  Japan  an  export  organization  of  textile  manufacturers 
is  rapidly  obtaining  the  rich  cotton  goods  trade  of  North 
China.  The  trade  in  tea  is  controlled  by  a  nation-wide 
**tea  council."  One  great  Japanese  firm,  which  in  itself  com- 
bines manufacturing,  mining,  shipping,  and  merchandising 
enterprises,  is  rapidly  extending  Japanese  trade  in  all  lines 
thruout  the  far  East,  and  the  Japanese  government  is  di- 


COOPERATION  113 

rectly  assisting  the  development  of  shipping,  banking,  and 
trading  for  foi-eign  business. 

British  manufacturers  have  relied  more  fully  upon  an  un- 
usually effective  merchandising  organization  for  foreign 
trade,  long  established  in  foreign  markets  and  giving  British 
products  a  superior  representation  there,  but  in  various  im- 
portant industries  they  have  gone  much  further.  Thus,  most 
of  the  great  coal-export  business  is  done  by  powerful  organ- 
izations, combining  mine  operations,  marketing  companies, 
shipping  lines,  and  foreign  distributing  companies.  This 
gives  British  coal  its  grip  on  the  rich  South  American  market. 
British  cement  manufacturers  are  united  in  a  strong  and  suc- 
cessful union  for  the  extension  of  their  overseas  trade.  Re- 
cently a  number  of  large  British  manufacturers  of  machinery 
of  all  sorts  have  formed  the  Representation  for  British  Manu- 
facturers, Ltd.,  an  organization  to  handle  their  business  in 
certain  important  foreign  markets  and  to  carry  on  an  aggres' 
sive  campaign  for  its  extension.  Similar  organizations  for 
foreign  trade  are  in  process  of  formation  among  other  Brit- 
ish manufacturers.  In  the  electrical,  cotton-textile,  potterjv 
tobacco,  wall-paper,  iron  and  steel,  and  various  other  indus- 
tries strong  associations  and  combinations  are  important 
factors  in  foreign  and  domestic  business. 

3.  Isolation  of  the  American  exporter. — It  is 
against  such  powerful  organizations  that  liundreds  of 
comparatively  small  American  producers  and  manu- 
facturers must  compete  for  foreign  trade.  Not  less 
serious  is  the  danger  threatening  the  American  seller 
from  highly  effective  combinations  of  foreign  buyers 
which  he  encounters  in  various  markets.  During  the 
great  European  war  this  situation  has  been  evidenced 
in  striking  examples.  Again  and  again  the  Ameri- 
can seller  has  had  to  submit  to  the  dictation  of  for- 
eign buying  committees,  some  of  which  represent  the 


114  FOREIGN  TRADE 

collective  buying  power,  not  merely  of  a  single  nation, 
but  of  groups  of  nations.  The  cotton-grower  felt 
the  weight  of  this  power  of  organized  demand  dur- 
ing the  year  1914  as  well  as  during  the  early  part 
of  1915. 

4.  American  copper  abroad. — But  the  war  merely 
emjihasizes  a  condition  that  exists  even  in  normal 
times.  John  D.  Ryan,  President  of  the  Amalgamated 
Copper  Company,  has  shown,  for  the  benefit  of  his 
own  industry,  the  conditions  that  prevailed  before  the 
European  war.  He  compiled  figures  covering  a 
period  of  ten  years,  ending  1913,  which  prove  beyond 
doubt  that  a  number  of  large  copper-producing  com- 
panies, representing  about  one-half  the  copper  pro- 
duction of  this  country,  sold  2,580,000,000  pounds  to 
domestic  consumers  at  15.21  cents  per  pound,  deliv- 
ered at  home,  while  the  foreign  consumers  got  their 
2,980,000,000  pounds  at  14.38  cents  per  pound,  deliv- 
ered at  foreign  ports,  that  is,  at  a  price  more  than  five 
per  cent  below  the  domestic  price.  This  deplorable 
condition  is  the  result  of  a  policy  which  allows  buying 
forces  to  combine  and  organize  while  selling  forces 
icuuiin  scattered. 

5.  Prussian  government  and  German  potash. — 
The  policy  of  this  country  as  regards  the  exportation 
of  natural  products  is  in  strong  contrast  to  that  of  the 
German  Empire.  Many  will  vividly  remember  the 
potash  controversy  of  1911.  At  that  time  the  Ger- 
man government  took  the  position  that  the  potash 
deposits  of  Germany  were  a  part  of  her  great  natural 


COOPERATION  115 

resources,  and  that  the  production  of  these  deposits 
for  the  exporting  trade  should  be  regulated  in  such  a 
way  as  to  bring  the  greatest  possible  returns  from 
other  parts  of  the  world  where  the  potash  was  needed 
and,  again,  in  thus  regulating  the  production,  the 
German  govermnent  would  merely  be  conserving  the 
resources  of  the  country  to  the  use  of  which  its  people 
were  justly  entitled.  The  problem  was  finally  solved 
thru  the  formation  of  a  government-controlled  semi- 
compulsory  syndicate,  a  form  of  combination  which, 
in  this  country,  would  veiy  probably  have  been  de- 
clared as  unlawful.  The  potash  situation  is  only  one 
illustration  of  the  methods  that  Germany  practises 
when  such  conditions  prevail.  In  the  case  of  the 
United  States,  the  method  of  handling  the  supply  of 
copper  furnishes  a  similar  illustration  to  that  of  the 
system  adopted  in  Germany. 

There  are  other  cases  of  a  like  nature.  Thus,  our 
exporters  of  lumber,  in  selling  to  Australia  and 
Europe,  encounter  conditions  similar  to  those  in  the 
copper  trade.  Austrian  textile  manufacturers  have 
a  buying  combination  to  import  their  raw  cotton. 
The  cooperative  wholesale  societies  of  Great  Britain 
control  organizations  maintained  by  14,000  coopera- 
tive societies.  It  is  said  that  combinations  of  British 
coal  brokers  fix  the  contract  price  for  bunkering  ships 
at  Newport  News.  And  four  London  firms  which, 
together,  are  known  as  the  Fixing  Board,  daily  set  the 
price  of  silver  for  the  world,  and  American  mining 
companies  must  sell  their  silver  for  the  English  and 


116  FOREIGN  TRADE 

the  great  Indian  market  to  one  of  these  four  houses. 
It  seems  hardly  reasonable  to  expect  the  American 
exporter  to  take  a  stand  all  alone  against  such  com- 
binations. A  New  York  lawyer  strikingly  described 
the  position  of  American  exporters  in  the  following 
words : 

If  you  can  imagine  a  squad  of  recruits,  responding  pa- 
triotically to  their  country's  call  for  foreign  service,  paying 
for  their  equipment  and  training  out  of  their  own  pockets, 
studying  their  equipment  without  any  aid  from  the  govern- 
ment except  a  correspondence  course  of  instruction,  and 
then,  without  any  company  or  battalion  drill,  being  sent  to 
the  front  with  the  plaudits  and  best  wishes  of  their  country, 
and  with  the  warning  that  if  they  ever  drill  or  fight,  as  a  co- 
ordinated army,  or  in  any  way,  except  as  unrelated  individ- 
uals, they  will  be  liable  to  court-martial  and  public  punish- 
ment upon  their  return,  you  have  a  very  good  idea  of  what 
your  predicament  is  now. 

6.  Smaller  manufacturer  handicapped. — Naturally 
the  smaller  manufacturer  suffers  most  from  the  pres- 
ent state  of  affairs.  The  Federal  Trade  Commission 
sent  out,  in  1915,  an  elaborate  questionnaire  to  man- 
ufacturers. One  of  the  questions  was,  whether  the 
manufacturer  would  like  to  be  able  to  cooperate  in 
foreign  trade.  Of  the  thousands  of  replies  that  were 
received,  85  per  cent  were  in  the  affirmative. 

Relatively  few  of  the  larger  organizations  of  the 
country  manifest  a  desire  to  enter  into  extensive  co- 
operation in  foreign  trade.  As  a  rule  they  are  strong 
enough  to  finance  and  protect  their  own  enterprises. 


COOPERATION  117 

In  one  sense,  the  large  American  corporations,  corre- 
spond to  the  European  cartels.  But  the  American 
combinations  of  large  businesses  in  most  cases  include 
the  manufacturing  industry,  while  the  German  cartel 
usually  has  to  do  with  the  selhng  alone.  Therefore,  in 
the  export  business  done  by  our  large  concerns  like  the 
United  States  Steel  Corporation  and  the  United 
Fruit  Company,  there  is  not  tlie  appearance  of  coop- 
erative effort,  because  each  firm  is  really  a  complete 
unit.  The  European  cartel,  on  the  other  hand,  is  a 
good  example  of  cooperation,  for  while  the  independ- 
ence of  the  member  concerns  is  presei'ved,  they  all 
form  together,  one  gi-eat  combination.  As  far  as  our 
large  corporations  are  concerned,  American  methods 
differ  only  in  form  from  the  European. 

Our  smaller  industrials  seem  to  find  that  the  cost  of 
engaging  singly  in  foreign  trade  is  prohibitive  and 
that  the  risk  is  too  great.  Warehousing  and  credit 
facilities  are  not  so  freely  available  to  the  small  export- 
ing manufacturer  as  they  are  to  the  large  corporation. 
It  is  claimed  by  those  who  do  not  believe  in  the  need 
of  cooperation  among  American  exporters,  that  the 
export  commission  house  renders  the  service  that 
cooperation  is  intended  to  perform.  It  is  true  that  a 
commission  house  is  in  the  nature  of  a  joint  selling 
agency  of  various  manufacturers  and,  as  such,  offers 
certain  advantages  that  cooperation  is  meant  to  secure. 
But,  if  possible,  it  is  preferable  to  build  up  a  joint 
selling  agency  of  manufacturers  on  a  cooperative 
basis,  utilizing  the  manufacturers'  own  resources  and 


118  FOREIGN  TRADE 

facilities.  In  any  case,  the  American  manufacturer 
should  be  freed  from  the  legal  impediments  that  the 
anti-trust  law  places  in  his  way  when  he  attempts  to 
extend  foreign  sales. 

7.  Advantages  of  cooperation. — Many  engaged  in 
foreign  trade  are  convinced  that  it  would  probably  be 
possible  to  remove  the  difficulties  which  today  hamper 
our  small  manufacturers  in  their  efforts  to  increase 
tlieir  exports,  or  that  at  least  these  difficulties  could 
be  lessened,  if  our  manufacturers  should  be  allowed 
to  cooperate.  In  connection  with  the  services  of  the 
forwarding  agent,  it  was  shown  how,  by  means  of  co- 
operation, duplication  of  clerical  work  can  he  avoided 
by  consolidating  a  number  of  small  shipments  into  one 
large  one.  But  there  are  many  other  advantages  that 
several  concerns  interested  in  foreign  trade  can  derive 
by  working  together. 

The  conditions  of  foreign  markets  must  be  investi- 
gated with  a  view  to  securing  information  on  the  fol- 
lowing important  points:  the  adaptability  of  prod- 
ucts to  various  markets,  the  right  cliaracter  of  com- 
mercial representatives,  the  competition  that  prevails 
in  any  given  field,  transportation  rates  and  facili- 
ties, insurance,  tariffs,  methods  of  payment,  and 
finally — and  this  is  very  important — the  credit  stand- 
ing of  the  prospective  clientele.  The  small  manufac- 
turer cannot  afford  the  expense  of  such  a  broad  and 
thoro  preparation,  but  if  that  expense  is  distributed 
among  many,  there  is  justification  for  taking  the 
necessary  steps.     Furthermore,  the  reduction  of  the 


COOPERATION  119 

selling  expense  that  results  from  its  distribution 
among  several  concerns,  may  permit  a  reduction  in 
the  sales  price  that  will  materially  increase  the  sala- 
bility  of  the  product. 

8.  Various  forms  of  cooperation. — Cooperation  in 
foreign  trade,  in  the  widest  sense,  includes  many 
phases.  It  involves  informal  agreements  relating 
solely  to  foreign  trade,  between  two  or  more  individ- 
uals or  concerns.  It  may  result  in  an  incorporated 
joint  selling  agency,  or  possibly  in  a  powerful  com- 
bination like  the  foreign  cartel  and  the  syndicate.  It 
is  not  likely  that,  in  the  near  future,  the  interpreta- 
tion which  the  people  of  this  country  now  put  upon 
business  relationship  will  undergo  such  a  change  tliat 
the  cartel  or  the  syndicate  will  be  introduced  into  oiu* 
economic  life.  The  strength  of  this  form  of  coopera- 
tion depends  largely  upon  the  protection  granted  to 
it  by  the  courts ;  the  latter  fine  any  parties  that  break 
their  agreements,  and  they  insist  upon  the  payment  of 
the  fines.  Since  the  cartel  and  the  syndicate  have 
proved  most  successful  in  European  countries,  a  de- 
scription of  their  general  features  and  policies  may 
prove  valuable  to  the  American  business  man  and 
may,  perhaps,  enable  him  to  work  more  successfully 
for  the  establishment  of  a  new  form  of  cooperation, 
especially  adapted  to  American  conditions. 

9.  German  cartels  and  syndicates. — Particularly  in 
Germany  the  cartel  and  the  syndicate  have  been 
developed  to  a  high  degree  of  perfection.    While  in 


120  FOREIGN  TRADE 

the  American  trust,  or  holding  company,  two  or  more 
concerns  are  united  in  an  ownership  that  may  be  either 
complete  or  partial,  in  the  German  cartel  each  of  the 
member  firms  possesses  absolute  independence.  The 
cartel,  as  a  whole,  merely  supervises  the  member 
organizations  in  their  various  activities  to  insure  that 
none  breaks  its  agreement.  Without  interfering 
with  the  manufacturing  end,  the  cartel  generally 
serves  as  a  joint  buying  agency,  and,  in  that  capacity, 
secures  raw  material  at  a  price  lower  than  that  which 
an  individual  firm  would  have  to  pay. 

There  are  several  different  kinds  of  cartels.  Some 
have  to  do  only  with  the  regulation  of  business  methods 
— in  other  words,  their  work  concerns  terms  of  pay- 
ments, terms  of  sales,  distribution  of  samples  and 
the  like.  The  price  cartel,  as  its  name  implies,  auns  to 
control  prices,  and  to  this  end  attempts  to  influence 
the  contracting  parties  to  come  to  an  agreement  con- 
cerning prices,  and  to  publish  a  common  price-list. 
In  the  highest  form  of  the  price  cartel,  each  of  the  in- 
dividual member  firms  is  subject  to  one  of  the  follow- 
ing conditions:  it  must  deal  with  one  specified  class 
of  customers ;  it  must  do  business  in  one  specified  ter- 
ritory; it  must  produce  one  specified  class  of  com- 
modity, or,  if  it  deals  in  a  common  commodity,  it 
must  produce  only  that  amount  which  the  cartel  shall 
specify.  By  establishing  a  maximum  output  for 
member  concerns,  the  cartel  can  exercise  a  powerful 
influence  over  prices.     Finally,  the  cartel  can  equal- 


COOPERATION  121 

ize  profits  by  pooling  the  excess  profits  made  by  some 
member  firms,  in  favor  of  those  that  fail  to  reach  a 
given  standard  of  earnings. 

The  syndicate  is  a  sales  cartel.  It  is  a  joint  sales 
department  composed  of  all  the  members,  who  retain 
independent  management  only  as  regards  their 
factories  and  mines. 

10.  Strong  expart  iwlicies. — The  stronger  cartels 
in  Germany  maintain  a  firm  export  policy.  In  many 
cases  they  pursue  the  practice  of  charging  for  their 
exports  lower  prices  than  those  which  the  domestic 
consumer  is  asked  to  pay.  The  justification  of  this 
policy  lies  in  the  fact  that,  on  account  of  the  magni- 
tude of  present-day  capital  investments  in  factories, 
it  is  imperative  to  strain  every  effort  to  keep  the  fac- 
tory going  to  its  gi-eatest  capacity.  The  foreign  mar- 
ket is  therefore  sought  as  a  valuable  outlet  for  excess 
production,  particularly  in  times  wlien  the  home  mar- 
ket is  dull.  To  increase  further  the  export  trade  of 
their  respective  members,  as  early  as  1891,  several 
cartels  and  syndicates  adopted  the  export-bounty  pol- 
icy. Since  that  time,  various  exports,  especially  iron 
and  steel  manufactures,  have  been  subsidized.  The 
cartels  controlling  the  production  of  coal,  iron,  raw 
steel  and  similar  products,  have  supplied  inland  man- 
ufacturers with  materials  at  reduced  rates,  when  such 
materials  went  into  export  manufactures.  This  pol- 
icy is  one  of  the  secrets  of  the  extraordinary  success 
of  the  exporting  industries  of  Germany  in  the  world 
market. 


122  FOREIGN  TRADE 

These  cartels  and  syndicates  are,  in  turn,  often  sub- 
sidiaries of  great  financial  institutions  that  control 
their  policy.  A  network  of  financial  interests  with 
ramifications  all  over  the  world,  makes  the  German 
export  organization  a  powerful  combination  of  Ger- 
man finance  and  industrj'^,  encouraged  by  the  govern- 
ment. The  individual  American  will  compete  in  vain 
with  this  tremendous  force  in  his  effort  to  conquer 
foreign  markets  unless  he  follows  the  example  of  the 
German  and  makes  use  of  strong  business  combina- 
tions. The  German  method — undoubtedly  the  best 
in  Europe — is  only  one  illustration  of  European  prac- 
tice. 

11.  Greater  necessity  for  cooperation  after  the 
European  war, — It  has  been  repeatedly  stated  that 
this  tendency  to  combine  and  cooperate  in  order  to 
gain  strength  and  efficiency  will  become  even  stronger 
after  the  European  war  than  it  is  now.  The  will  to 
conquer,  the  ability  to  organize  and,  fijially,  the  will- 
ingness of  the  individual  to  subordinate  himself  to  tlie 
interests  of  the  whole  group  will  be  greatly  empha- 
sized as  a  result  of  the  conditions  brought  about  by 
this  war;  and  all  these  factors,  combined,  will  go  far 
to  prevent  the  material  destruction  and  personal  losses 
caused  by  the  war  from  seriously  hurting  European 
commerce  and  industry.  There  is,  consequently,  an 
increasing  need  that  the  United  States  place  those 
who  are  to  fight  its  commercial  battles  upon  an  equal 
footing  with  their  opponents. 

12.  Becent  attempts  to  bring  about  cooperation. 


COOPERATION  123 

— Encouraging  steps  have  been  taken  in  this  direc- 
tion. The  formation  of  the  American  International 
Corporation  represents  the  most  important  effort  so 
far  to  bring  about  the  proper  coordination  between 
banking,  transportation,  commercial  and  manufac- 
turing interests.  This  organization,  which  stands  as 
a  landmark  in  a  new  era  of  American  business,  should 
be  the  forerunner  of  many  similar  institutions. 

Nor  are  pioneers  in  trade  cooperation  lacking. 
Altho  it  is  by  no  means  a  new  idea  to  attempt  to  de- 
velop American  trade  in  a  particular  market  thi*u  the 
establishment  there  of  a  local  enterprise  controlled  by 
a  combination  of  manufacturers,  nevertheless  experi- 
ments of  this  sort  have,  up  to  this  time,  met  with  little 
success.  As  far  back  as  thirty  years  ago,  a  combina- 
tion of  six  or  eight  American  manufacturers  of  differ- 
ent kinds  of  shoes,  established  a  syndicate  in  London 
which,  during  the  time  of  its  existence,  was  fairly  suc- 
cessful and  stimulated  the  American  exports  of  boots 
and  shoes  to  Europe. 

13.  International  Manufacturers*  Sales  Company 
of  America. — ^Whether  or  not  recent  efforts  of  this 
kind  will  prove  more  successful,  time  alone  can  tell. 
A  conspicuous  example  of  this  new  development  in 
the  American  export  business  is  found  in  the  creation 
of  the  International  Manufacturers'  Sales  Company 
of  America.  This  is  a  $100,000  corporation  with 
headquarters  at  Chicago,  organized,  financed  and  con- 
trolled exclusively  by  manufacturers.     Its  principal 


124  FOREIGN  TRADE 

object  at  present  is  to  foster  the  trade  of  its  members 
in  Russia,  and  later  on  to  do  the  same  thing  in  other 
countries.  Since  reciprocity  is  the  best  foundation  of 
foreign  trade,  the  company  also  aims  to  develop  the 
exportation  of  goods  of  Russian  origin  from  Russia 
to  the  United  States. 

The  stock  is  held  by  fifty  manufacturers  of  non- 
competing  lines  and  each  manufacturer  has  equal 
rights  as  regards  all  operations,  property  and  earn- 
ings of  the  company.  An  investment  of  two  thou- 
sand dollars  gives  a  manufacturer  the  right  to  estab- 
lish his  own  branch  house  in  Russia.  The  Chicago 
office,  the  real  center  of  the  organization,  is  controlled 
by  a  board  of  directors.  The  members  are  elected 
from  among  the  manufacturers,  who  are  members  of 
the  corporation.  Thus,  full  control  at  all  times  is  in 
the  hands  of  the  manufacturers  themselves. 

Goods  are  billed  to  the  company,  either  at  the  same 
price  as  those  at  which  the  manufacturer  bills  goods 
to  his  branch  house  here,  or  else  at  regular  export 
prices.  The  problem  of  credit,  which  has  been  more 
or  less  of  a  stumbling  block  in  the  way  of  direct  trade 
with  Russia,  is  solved  by  the  cooperation  of  leading 
banks. 

It  is  difficult  to  foretell  whether  or  not  certain  fail- 
ings of  human  nature  such  as  jealousy,  personal 
greed  and  stubbornness,  resulting  from  too  great  per- 
sonal independence,  will  wreck  this  structure  which 
is  founded  upon  cooperation.     Up  to  January  1917 


COOPERATION  125 

five  branches  had  been  established  in  Russia.  The 
president  reports  that  the  volume  of  business  done  so 
far  surpasses  all  expectations.  All  those  who  wish  to 
see  cooperative  methods  introduced  into  the  foreign 
trade  of  this  country  will  watch  with  the  greatest  in- 
terest the  operations  of  this  concern,  which  represents 
only  one  of  several  experiments  along  the  same  line. 

14.  Plan  of  Mr.  W.  S,  Kies. — The  plan  described 
above  is  based  largely  upon  the  suggestions  that  JNIr. 
Ivies  of  the  National  City  Bank  presented  in  an 
address  before  the  American  Academy  of  Political 
and  Social  Science.  These  suggestions  are  given 
below : 

1.  The  corporation  is  to  be  impartially  organized  in  a 
manner  fair  to  all  its  members,  and  the  management  selected 
with  expert  ability  as  the  sole  test. 

2.  Membership  in  the  Board  of  Directors  to  be  arranged 
so  that  in  due  course  of  time  every  member  shall  receive 
representation.  To  avoid  possibility  of  unfair  treatment, 
there  will  be  provided  a  permanent  arbitration  committee,  to 
be  selected  in  an  impartial  manner,  and  to  be  made  up  of 
persons  having  no  interest  in  the  industry.  This  may  be 
invoked  by  any  member. 

3.  Each  member  shall,  at  the  beginning  of  the  year,  re- 
port to  the  Export  Corporation  the  amount  of  its  product 
available  for  export  during  the  year,  the  conditions  of  de- 
livery and  of  acceptance  of  orders,  at  the  price  at  which  it 
is  willing  to  sell  in  a  foreign  market.  These  tenders  may  be 
changed  from  time  to  time,  under  such  conditions  as  may  be 
thought  advisable,  and  special  quotations  of  additional  quan- 
tities may  be  named  whenever  desirable. 

4.  The  sales  force  of  the  corporation  will  undertake  the 
disposal  of  the  exportable  surplus  of  its  members  on  the  terms 


126  FOREIGN  TRADE 

and  conditions  specified,  obtaining  the  best  price  possible, 
making  use  of  the  export  commission  houses,  the  local  repre- 
sentatives, the  trained  salesman  and  every  agency  of  value 
in  building  up  foreign  trade.  The  difference  between  the 
price  quoted  and  the  price  obtained  shall  belong  to  the  Ex- 
port Corporation  as  a  profit,  and  upon  all  sales  all  members 
shall  pay  to  the  Export  Corporation  the  same  percentage  as 
a  commission. 

5.  Whenever  a  demand  shall  be  found  to  exist  in  a  par- 
ticular market  for  a  certain  quantity  of  goods  which  must 
be  sold  at  a  lower  price  than  quoted  by  any  of  the  members, 
in  order  to  meet  foreign  competition,  all  members  shall  be 
notified  of  the  possible  order,  and  given  an  opportunity  to 
meet  the  foreign  price.  Competitive  bids  will  be  received,  and 
the  lowest  bidder  receive  the  order ;  or,  if  there  are  a  number 
of  low  bidders,  the  order  be  divided. 

6.  All  profits,  after  deducting  all  expenses,  and  setting 
aside  such  a  sum  as  shall  be  deemed  necessary  for  promotion, 
advertising,  establishment  of  permanent  quarters,  etc.,  shall 
be  distributed  equally  among  the  members. 

7.  The  Export  Corporation  shall  provide  an  expert  who 
shall  collect  statistical  data  and  information  of  value  to  the 
industry,  which  shall  be  distributed  promptly,  and  under  the 
same  conditions,  and  in  the  same  manner,  to  all  members. 
The  Export  Corporation  shall  also  have  on  its  staff  an  effi- 
ciency engineer,  who  shall  make  intensive  study  of  methods 
of  production  in  the  industr}^  cost  of  production,  competi- 
tive margins,  and  the  productive  capacity  of  various  plants. 
His  services  shall  be  available  to  any  of  the  members  for  the 
purpose  of  giving  advice  as  to  the  development  of  greater 
efficiency  In  production,  diminishing  the  cost  of  production, 
or  increasing  the  output.  He  shall  also  give  to  all  members 
technical  advice  as  to  the  best  methods  of  meeting  peculiar 
requirements  of  foreign  markets. 

8.  The  Export  Corporation  may  also  act  as  a  purchasing 
agency  for  raw  materials.  Being  able  to  purchase  In  large 
quantities,  as  a  representative  of  many  consumers  in  a  given 


COOPERATION  127 

line,  it  will  be  able  to  buy  in  foreign  markets  at  the  lowest 
price.  All  members  will  be  entitled  to  the  Corporation's  serv- 
ices in  this  respect,  upon  the  same  terms. 

15.  Legal  status  of  cooperative  organizations. — 
There  are  in  existence  now  several  other  instances  of 
cooperative  effort  among  American  manufacturers 
and  producers  in  foreign  trade,  but  all  of  them  have 
to  do  with  competitive  lines  of  trade.  What  is  needed, 
however,  more  than  anything  else,  is  the  cooperation 
of  firms  that  produce  "competing"  commodities — that 
is,  commodities  which  are  similar.  But  the  probabil- 
ity of  success  in  this  connection  is  not  so  great  since 
our  manufacturers  fear  the  application  of  the  anti- 
trust laws,  and  their  fear  is  naturally  detrimental  to 
the  energy  and  initiative  that  are  necessary. 

These  statutes,  as  they  are  expressed,  do  not  differ- 
entiate foreign  trade  from  interstate  trade — for  ex- 
ample, the  Sherman  Act  is  prohibitory  with  respect 
to  foreign  trade,  as  much  as  it  is  with  regard  to  do- 
mestic trade.  Altho  enacted  primarily  for  the  pro- 
tection of  the  domestic  consumer,  the  anti-trust  laws, 
largely  because  of  the  lack  of  clarity  in  the  wording, 
possess  this  prohibitory  force  as  regards  foreign  trade. 
Until  these  laws  are  amended  so  as  to  allow  our  man- 
ufacturers to  cooperate  in  foreign  trade,  there  can 
be  no  general  participation  in  American  export  trade 
by  the  rank  and  file  of  small  American  manufactur- 
ers. 

What  we  want  is  an  answer,  and  a  positive  answer ;  we  do 
not  want  the  surmises  of  lawyers :  Ave  do  not  want  the  best 

XV— 10 


128  FOREIGN  TRADE 

wishes  of  gentlemen  who  are  temporary  incumbents  of  gov- 
ernment positions,  and  wlio  tomorrow  may  not  be  there.  We 
do  not  want  four-year  dispensations  from  attorneys-general 
who  will  be  out  of  office  four  years  from  now.  We  want  the 
definite,  positive  answers  that  business  men  require  in  any 
enterprise  in  which  they  are  asked  to  put  their  labor  and 
risk  their  capital. 

16.  Permissive  legislation  needed. — The  way  to 
bring  about  that  cooperation  in  our  export  trade  which 
is  necessaiy  for  successful  ventures  in  foreign  busi- 
ness, is  to  pass  permissive  legislation  that  shall  exempt 
foreign  trade  from  the  impediments  placed  upon  it  by 
the  anti-trust  laws. 

This  permissive  legislation  should  be  readily  passed 
by  Congress.  The  voluminous  debates  that  preceded 
the  passage  of  the  Sherman  Act  in  1890,  while  they 
covered  every  possible  phase  of  the  subject,  failed  to 
suggest  or  hint  in  the  remotest  way  that  the  consumers 
of  other  countries  should  be  protected  by  the  statute. 
This  country,  like  eveiy  other,  restricts  the  scope  of 
its  legislation  to  the  needs  and  welfare  of  its  own 
people,  and  naturally  assumes  that  other  countries 
will  take  care  of  their  own  citizens.  Therefore,  no 
statute  is  presumed  to  have  extra-territorial  applica- 
tion. 

17.  Objection  to  foreign  trade  exemption. — Those 
who  object  to  the  exemption  from  the  anti-trust  laws 
of  those  engaged  in  foreign  trade  argue  that  coopera- 
tion in  export  trade  would  somehow  react  unfavorably 
upon  the  domestic  trade.  But,  as  a  matter  of  fact, 
our  courts  are  fully  in  a  position,  and  well  prepared, 


COOPERATION  129 

to  ward  off  any  attack  that  might  be  directed  against 
the  domestic  consumer  by  an  export  cooperative  as- 
sociation or  other  export  combination.  It  is  further 
claimed  by  those  who  opposed  cooperation  or  com- 
bination in  export  trade,  that  it  might  be  used  to  the 
detriment  of  those  who  remain  outside  of  the  coopera- 
tive organization.  Apart  from  the  fact  that  the  Fed- 
eral Trade  Commission  has  full  power  to  prevent  un- 
fair methods  of  competition,  it  is  hardly  to  be  expected 
that  occasion  for  friction  between  those  who  cooperate 
and  those  who  remain  outside  Avill  arise. 

The  outsider  either  does  not  wish  to  join  the  coop- 
erative organization  or  is  not  permitted  to  do  so.  The 
man  who  does  not  wish  to  enter  believes  that  he  can 
do  best  by  relying  upon  his  own  abilities  and  re- 
sources. Perhaps  he  hopes  that  he  will  indirectly 
benefit  from  the  educational  work  performed  by  the 
organization  without  becoming  a  member.  To  estab- 
lish compulsory  cooperative  organizations  seems  pre- 
posterous. The  other  group  of  outsiders — those  who 
are  not  allowed  to  join  cooperative  organizations — 
consists  of  persons  who  are  excluded  because  of  lack 
of  experience  or  of  financial  strength.  They  would 
do  better,  in  any  event,  to  combine  among  themselves 
rather  than  to  form  a  weak  adjunct  of  a  combination 
of  manufacturers  stronger  than  themselves. 

18.  Clayton  Anti-Trust  Law  and  foreign  trade. — 
The  fact  that  great  care  was  taken  to  exclude  from  the 
Clayton  Anti-Trust  Act,  which  was  passed  in  1914, 


130  FOREIGN  TRADE 

anything  relating  to  foreign  trade,  shows  that  Con- 
gress is  aware  of  the  difference  between  domestic  and 
foreign  business,  as  regards  the  interests  of  the  domes- 
tic consumer. 

Many  half-way  measures  have  been  suggested  with 
respect  to  relieving  the  exporter  of  the  burden  im- 
posed upon  him  by  the  anti-trust  laws.  Some  have 
suggested,  for  example,  that  exporters  who  cooperate 
in  foreign  trade  be  exempted  from  the  penalties  of  the 
Sherman  Law,  provided  they  file  their  plans  with  the 
Federal  Trade  Commission,  and  obtain  from  the  Com- 
mission an  order  approving  of  those  plans.  Others 
have  proposed  that  the  Federal  Trade  Commission, 
or  some  other  judicial  body,  or  perhaps  the  attorney- 
general,  be  given  the  right  to  determine,  whether  or 
not  in  any  given  case,  foreign  trade  combination  re- 
quires the  application  of  the  anti-trust  laws.  This 
last  proposition  was  indorsed  by  the  United  States 
Chamber  of  Commerce. 

19.  Federal  Trade  Commissicm. — The  inadequacy 
of  such  compromise  proposals  has  been  recognized  by 
the  Federal  Trade  Commission  itself,  which  was 
formed  in  1914.     President  Wilson  said: 

The  Federal  Trade  Commission  is  authorized  and  empow- 
ered to  inquire  into  and  report  to  Congress  not  only  upon 
the  conditions  of  trade  in  this  country,  but  upon  the  condi- 
tions of  trade,  the  cost  of  manufacture  and  transportation, 
and  all  questions  of  combinations  which  affect  international 
trade  between  Europe  and  the  United  States.     It  has  the 


COOPERATION  131 

full  power  \vhich  will  guide  Congress  into  scientific  treatment 
of  all  questions  of  international  trade. 

The  Commission,  which  is  to  be  our  expert  guide, 
in  its  summary  report  issued  in  June,  1916,  strongly 
recommended  that  Congress  pass  declaratory  legisla- 
tion which  should  remove  all  doubt  regarding  the  le- 
gality of  combinations  in  foreign  trade.  The  report 
in  part  reads  as  follows: 

By  its  investigation  the  Commission,  however,  has  estab- 
lished the  fact  that  doubt  as  to  the  appHcation  of  the  anti- 
trust laws  to  export  trade  now  prevents  concerted  action  by 
American  business  men  in  export  trade,  even  among  producers 
of  non-competing  goods.  In  view  of  this  fact  and  of  the  con- 
viction that  cooperation  should  be  encouraged  in  export 
trade  among  competitors  as  well  as  among  non-competitors, 
the  Conmiission  respectfully  recommends  the  enactment  of 
declaratory  and  permissive  legislation  to  remove  this  doubt. 

The  Commission  feels  that  it  would  fail  of  its  duty  if  it 
did  not  urge  the  pressing  need  of  such  action  immediatel}^ 
If  American  business  men  are  to  make  the  most  of  the  great 
opportunities  now  before  them,  are  to  build  securely  in  for- 
eign trade,  and  are  to  avoid  disaster  in  the  shock  of  the 
stern  and  determined  competition  that  will  doubtless  follow 
the  war,  they  must  at  once  perfect  the  organization  de- 
manded by  the  conditions  of  international  trade. 

20.  Webb  Bill. — The  suggestion  of  the  Commis- 
sion took  tangible  form  when  Representative  Webb, 
at  the  instigation  of  the  Federal  Trade  Commis- 
sion and  the  Department  of  Commerce,  introduced 
a  bill  which  contains  the  following  provisions:  That 
nothing  contained  in  the  anti-trust  laws  shall  be  con- 
strued as  declaring  to  be  illegal,  either  an  association 


132  FOREIGN  TRADE 

which  has  for  its  sole  purpose  the  fostering  of  export 
trade  and  whicli  actually  engages  solely  in  such  trade, 
or  an  agreement  made,  or  act  done,  in  connection 
with  export  trade  by  such  associations,  provided  such 
agreement  or  act  is  not  in  restraint  of  trade  within  the 
United  States.  The  bill  was  strongly  recommended 
by  leading  exporters  and  manufacturers  in  this  comi- 
try,  and  was  passed  by  the  House  but,  owing  to  lack 
of  time,  never  reached  the  Senate  in  the  first  session 
of  the  64th  Congress. 

21.  The  Eccport  Association  of  Canada. — The 
most  significant  example  of  cooperation  among  Cana- 
dian exporters  is  the  recently  formed  society  known 
as  the  Export  Association  of  Canada.  It  was  incor- 
porated in  the  summer  of  1915.  According  to  its 
j^rospectus,  its  shareholders  include  ninety-five  Cana- 
dian manufactures,  representative  of  practically  every 
line  of  business,  as  well  as  of  many  of  Canada's  larg- 
est companies. 

The  purpose  of  the  new  institution  is  to  build  up 
for  Canada  a  permanent  trade  with  other  portions  of 
the  Biitish  Empire  and  other  countries.  The  func- 
tions which  the  Association  sets  up  for  itself  are  to 
create  a  favorable  strategical  position  in  outside  mar- 
kets for  Canadian  industry  as  a  whole;  to  secure  de- 
tailed information  and  actual  orders  for  its  members; 
to  introduce  the  representatives  of  Canadian  firms  to 
the  most  important  buyers  in  other  markets;  to  find 
reliable  export  agents  for  its  members  in  markets 
where  representation  is  required;  to  collect  and  make 


COOPERATION  133 

shipments  of  export  orders,  and  where  possible  to  fi- 
nance the  same;  to  organize  production  in  Can- 
ada which  will  make  possible  the  successful  execution 
of  large  export  orders. 

The  Association  is  endeavoring  especially  to  con- 
centrate its  efforts  in  selling,  shipping  and  financing, 
to  make  it  possible  for  a  large  number  of  the  smaller 
manufacturers,  many  of  whom  have  hitherto  done 
little  or  no  export  business,  to  open  up  profitable  con- 
nections abroad.  At  the  same  time  its  managers  have 
been  able  to  attract  some  of  the  larger  manufacturers 
who  have  their  own  organizations  for  doing  business 
abroad  by  promising  to  prepare  in  foreign  markets  a 
general  strategical  field  within  which  they  could  fol- 
low their  own  objectives. 

22.  OtJier  associations. — There  are  a  number  of 
commercial  organizations  which  directly  or  indirectly 
do  a  good  deal  to  increase  Canada's  foreign  trade. 
The  various  Boards  of  Trade  or  Chambers  of  Com- 
merce and  their  provincial  associations,  which  are  by 
no  means  concerned  exclusively  with  foreign  trade, 
do  a  good  deal  to  acquaint  manufacturers  of  the 
needs  and  opportunities  of  foreign  trade  and  to  dis- 
seminate information  and  advice  in  regard  to  ship- 
ping, credits,  rates,  insurance,  etc. 

REVIEW 

Why  is  cooperation  in  foreign  trade  desirable?  Why  is  the 
American  exporter  at  a  disadvantage  in  competing  for  foreign 
trade  ? 

Describe  the  purpose  and  operation  of  the  German  cartels. 


1S4  FOREIGN  TRADE 

Describe  the  International  Manufacturers  Sales  Company  of 
America. 

What  plan  of  cooperation  is  proposed  by  Mr.  W.  S.  Kies? 

How  do  the  anti-trust  laws  hamper  the  American  exporter? 

Explain  the  measures  proposed  for  removing  the  handicaps  of 
existing  legislation. 

Describe  the  nature  and  work  of  the  Export  Association  of 
Canada. 


CHAPTER  VII 

THE  TECHNIC  OF  EXPORT  TRADE 

1.  Soliciting  indents. — The  origin  of  export  trade 
is  the  foreign  order,  or  the  indent.  There  are,  how- 
ever, several  actions  which  ordinarily  precede  the  niati- 
ufacturer's  receipt  of  a  foreign  order.  Before  a  for- 
eign customer  places  an  order,  he  wishes  to  be  in- 
formed concerning  the  price  of  the  goods,  as  well  as 
their  quality  and  their  general  nature.  Correspond- 
ence, and  often  the  sending  of  samples,  precedes  the 
placing  of  the  order.  If  a  manufacturer  has  so  es- 
tablished himself  in  a  foreign  market  so  that  his  prod- 
ucts are  known,  these  preliminaries  are  not  necessary. 
Nor  is  it  generally  necessary  to  send  samples  when  the 
commission  house  or  any  middleman  intervenes. 

Until  a  certain  brand  of  goods  is  introduced,  how- 
ever, either  in  the  domestic  market  or  abroad,  the 
sample  is  sometimes  not  only  an  important,  but  even 
a  vital  element  in  successful  export  trade,  for  the  for- 
eign customer  will  often  insist  upon  knowing  exactly 
the  nature  of  the  goods  which  he  is  to  receive. 

2.  Sending  samples. — Generally  speaking,  the 
manufacturer  should  steer  a  middle  course  as  regards 
his  sample  policy.  On  the  one  hand,  he  should  use 
samples  freely  when  to  do  so  will  increase  his  sales; 
on  the  other  hand,  he  should  avoid  sending  samples 

]35 


136  FOREIGN  TRADE 

out  indiscriminately.  He  should,  at  all  times,  be  ex- 
tremely careful  not  to  fall  into  the  hands  of  "sample 
collectors."  The  samples  should  be  accompanied  by 
personal  letters  and  should  be  addi'essed  only  to  care^ 
fully  selected  prospects.  The  question  of  charging 
for  samples  is  also  a  delicate  one.  If  a  charge  is 
made,  a  hberal  discount  should  be  allowed  on  the  reg- 
ular price,  but  it  should  be  kept  in  mind  that  too  great 
a  reduction  arouses  suspicion  as  to  the  real  value  of 
the  goods  represented  by  the  sample.  It  seems  un- 
wise to  send  a  sample  to  a  foreign  customer,  unless 
it  has  been  requested,  since  in  many  cases  the  con- 
signee is  caused  considerable  trouble  and  expense  in 
connection  with  getting  it  thru  the  customs. 

3.  Samples  issued  represent  goods. — The  most  mi- 
portant  point  to  remember  in  sending  out  samples  is 
that  they  should  by  all  means  be  representative  of  the 
goods  that  they  advertise.  If  a  customer,  judging 
by  samples  that  he  has  received,  orders  goods  and 
these  do  not  measure  up  to  the  standard  of  the  sam- 
ples, endless  trouble  is  apt  to  arise.  To  disapj)oint 
the  foreign  buyer  is  much  more  serious  than  to  make 
this  mistake  in  the  case  of  a  domestic  buyer,  since  in 
the  former  instance  the  delay  resulting  from  the  dis- 
tance separating  the  two  parties  renders  apologies 
useless — in  fact,  almost  impossible.  The  British  Sale 
of  Goods  Act — passed  in  1893 — which  still  applies  in 
many  markets  of  the  world,  includes  the  following 
provisions : 

In  the  case  of  contracts  for  sale  by  sample  there  is  an 


TECHNIC  OF  EXPORT  TRADE  137 

implied  understanding:  (1)  that  the  bulk  shall  correspond 
with  the  sample  in  quality;  (2)  that  the  buyer  shall  have 
a  reasonable  opportunity  of  comparing  the  bulk  with  the 
sample;  (3)  that  the  goods  shall  be  free  from  any  defect 
rendering  them  unmerchantable,  which  would  not  be  apparent 
on  reasonable  examination  of  the  sample. 

These  represent  the  minimum  requirements  that  ex- 
porters should  fulfil  in  sending  abroad  samples  that 
will  form  the  basis  of  future  sales. 

4.  Price  policy. — The  next  question  to  be  an- 
swered is,  What  price  shoidd  be  quoted  to  the  foreign 
buyers?  This  point  was  touched  upon  in  the  discus- 
sion concerning  the  various  agents  of  foreign  trade, 
and  the  difficulty  that  arises  from  the  employment 
of  commission  houses  and  exclusive  agents  was  ex- 
plained. The  use  of  various  agents  at  the  same  time, 
makes  the  question  of  price  policy  a  rather  compli- 
cated one.  Furthermore,  many  items  enter  into  the 
make-up  of  the  foreign  sales  price  which  do  not  ap- 
pear in  domestic  business,  as,  for  example,  ocean 
freight,  custom-house  duties,  dock  dues,  fluctuations 
in  foreign  currencies,  and  gi'atuities  and  fees  for  cus- 
tom house  brokers. 

Prices  must  be  varied  according  to  the  class  of  cus- 
tomers, the  quantity  of  goods  bought,  and  the  terri- 
tory in  which  the  customers  are  located.  In  export 
trade  the  principle  of  "one  price  for  all"  cannot  be 
applied. 

In  most  cases  cash  discount  should  not  be  given, 
since  the  same  discounts  that  might  induce  a  domestic 
buyer  to  pay  in  casli  within  the  time  specified  in  the 


138  FOREIGN  TRADE 

terms  of  sale,  might  have  no  effect  upon  a  foreign 
buyer,  because  the  rate  of  interest  in  his  country  is 
much  higher  than  it  is  here.  Also,  the  complicated 
method  of  quoting  discounts,  as  it  is  often  used  in  our 
domestic  business,  should  be  avoided  in  foreign  busi- 
ness, since  foreign  importers  are  often  unable  to  grasp 
the  meaning  of  such  quotations.  Prices  should  be 
quoted  either  in  the  currency  of  the  importing  coun- 
try, or  else  in  sterling,  unless  the  dollar  has  been  suc- 
cessfully introduced. 

5,  Details  of  quotations. — In  quotation  forms,  the 
following  features  should  be  specifically  and  clearlj^ 
indicated:  the  place  where  the  goods  are  to  be  deliv- 
ered; the  manner  in  which  the  goods  are  to  be  packed ; 
the  approximate  date  when  shipment  is  to  be  made; 
the  liabilities  assumed  by  the  manufacturer ;  the  forms 
of  marine  insurance  that  will  be  supplied  in  case  spe- 
cific instructions  are  given  by  the  buyer;  and  finally, 
the  terms  of  payment.  The  length  of  time  for  whicli 
quotations  hold  good  should  be  definitely  stated.  It 
is  unwise  to  quote  prices  "subject  to  change  without 
notice." 

According  to  place  of  delivery,  discrimination  is 
made  between  f.  o.  b.  and  c.  i.  f.  prices.  C.  i.  f. 
means  "cost,  insurance  and  freight";  f.  o.  b.  should 
be  understood  to  mean  "free  on  board  the  outgoing 
ocean  vessel."  The  f.  o.  b.  price,  then,  ought  to 
include  all  charges  for  packing,  railroad  freights, 
lighterage  and  dock  dues,  if  any,  incurred  in  placing 
the  goods  on  board  the  steamer.    Unfortunately  the 


TECHNIC  OF  EXPORT  TRADE  139 

term  is  being  abused  by  many  manufacturers,  who 
quote  *'f.  o.  b.,  factory,"  or  "f.  o.  b.,  New  York," 
meaning  thereby,  in  the  first  case,  that  the  price  in- 
cludes only  those  charges  up  to  and  including  the  time 
when  the  goods  were  placed  in  the  railroad  cars  at  the 
factory  sidings;  and  in  the  second  case,  merely  that 
freight  charges  are  paid  up  to  the  time  the  goods 
arrive  in  New  York.  This  loose  way  of  using  the 
term  f.  o.  b.  has  given  rise  to  much  misunderstand- 
ing and  consequent  dissatisfaction  on  the  part  of  the 
buyer. 

If  the  charges  for  placing  the  goods  on  board  the 
vessel  are  not  included  in  the  price,  the  term  f.  a.  s., 
meaning  "free  alongside  steamship,"  is  used.  The 
expense  for  hoisting  the  goods  into  the  vessel  is  usu- 
ally included  in  the  freight  charge,  so  in  American 
exporting  practice  f.  a.  s.  has  the  same  meaning  as 
f.  o.  b,  (See  example  of  f.  a.  s.  contract,  pages  141- 
U9.) 

As  has  already  been  said,  the  letters  c.  i.  f.  stand 
far  "cost,  insurance  and  freight."  In  other  words, 
the  c.  i.  f.  price  includes  all  expenses  up  to  the  time 
the  goods  are  landed,  but  it  does  not  include  the  for- 
eign import  duty,  the  landing  charges,  or  any 
other  item.  In  this  respect  the  c.  i.  f.  price  differs 
radically  from  the  "f.  o.  b.  destination"  price,  which 
includes  all  the  items  exempted  from  the  c.  i.  f. 
price.  A  question  might  arise  as  to  the  nature  of  the 
insurance  to  be  included  in  the  price  that  is  quoted. 


140  FOREIGN  TRADE 

Generally  speaking,  a  "free  of  particular  average" 
policy  is  considered  sufficient.  It  is  advisable,  how- 
ever, when  insurance  is  included  in  the  price,  to  state 
distinctly  to  what  kind  of  insurance  reference  is  made. 

The  object  of  quoting  c.  i.  f.  prices  is  to  enable  the 
foreign  customer  to  ascertain  exactly  what  his  goods 
will  cost  him  at  the  seaport  of  his  country.  The  ex- 
pense of  removing  the  shipment  from  the  steamer  can 
be  calculated  more  easily  by  the  consignee  than  by 
the  exporting  manufacturer.  This  fact  influences  the 
exporter  to  favor  the  quotation  of  the  c.  i.  f.  price 
rather  than  the  "f.  o.  b.  destination"  price.  In  each 
case,  the  liabilities  of  seller  and  buyer  under  c.  i.  f. 
terms,  tho  largely  regulated  by  custom  and  commer- 
cial law,  should  be  set  forth  clearly  in  order  that  all 
possibility  of  misunderstanding  in  regard  to  respon- 
sibility may  be  avoided.  The  facsimile  of  a  c.  i.  f. 
contract  given  on  page  141  shows  a  detailed  enmnera- 
tion  of  the  conditions  of  sale. 

Variations  of  the  c.  i.  f.  price  are  the  c.  f.  and 
the  c.  i.  f.  &  e.  The  first  of  these  two  explains  it- 
self. The  second  includes,  in  addition  to  the  elements 
of  the  c.  i.  f.  price,  the  item  of  exchange.  This 
quotation  is  used  more  frequently  in  trading  with 
Australia  and  South  Africa  than  in  trading  with  any 
other  lands. 

The  question  of  foreign  credit-ratings  and  of  ar- 
rangements in  regard  to  the  payment  of  the  bill  will 
be  treated  in  another  Text. 


TECHNIC  OF  EXPORT  TRADE 


141 


United  States  Steel  Products  Company 
general  office  new  york,  u.  s.  a. 

Exporters  of  the  Products  of 
Cahxegie  Steel  Co.  American  Bbidge  Co. 

Illinois  Steel  Co.  The  Louain  Steel  Co. 

American  Steel  &  Wire  Co.  National  Tube  Co. 

American  Sheet  &  Tin  Pl.\te  Co.  Shelby  Steel  Tube  Co. 

Tennessee  Coal,  Iron  &  Railroad  Co. 

No 19.... 

CONTRACT    COVERING    SALE    OF    BY 

UNITED  STATES  STEEL  PRODUCTS  CO. 
To   


Description 
Price 
Payment 
Quality 

Specifications 


Time  of  Ship- 
ment 

Remarks 
Conditions 
of  Sale 


Specifications  shall  be  furnished  to  the  seller  by  the 
buyer  in  substantially  equal  monthly  quantities,  begin- 
ning on  or  before  the  first  day  of  ,  19 

and  ending  on  or  before  the  last  day  of  

19 Buyer's    failure    to    furnish    specifications,    as 

aforesaid,  may  at  seller's  option,  without  notice  to  buyer, 
be  treated  and  considered  as  a  waiver  on  the  part  of  the 
buyer  of  all  right  to  demand  any  subsequent  delivery  of 
the  unspecified  portion  of  the  goods. 


This  contract  is  subject  to  Conditions  of  Sale  F.  A.  S. 
Vessel  printed  on  back  hereof. 

It  is  understood  that  the  seller  does  not  manufacture 
the  materials  mentioned  herein,  but  is  to  obtain  them 
from  such  manufacturers  as  it  may  select.  Such  selection 
shall  be  in  the  absolute  discretion  of  the  seller  and  shall 
in  no  way  aff'ect  any  of  the  provisions  of  this  contract, 


1*2  FOREIGN  TRADE 

but  this  right  shall  not  relieve  the  seller  from  its  obliga- 
tion to  furnish  material  of  the  kind  and  quality  and  at 
the  cost  herein  specified. 

UNITED  STATES  STEEL  PRODUCTS  CO. 


Accepted 


CONDITIONS  OF  SALE  F.  A.  S.  VESSEL 
The  seller  referred  to  in  these  Conditions  of  Sale  is  un- 
derstood   to    be    the    UNITED    STATES    STEEL 
PRODUCTS  COMPANY. 
1.  It  is  understood  and  agreed  that  f.  a.  s.  vessel  means 
F.  A.  S.  Vessel  delivery  by  the  carriers  alongside  the  vessel  or  at  the 
Sales  wharf,  pier,  or  other  customary  place  of  receiving  goods 

destined  for  shipment  by  vessel.  The  seller  may,  at  its 
option,  tender  to  the  purchaser  or  his  agent  the  usual 
ship's  receipt  or  a  prepaid  railroad  bill  of  lading  from 
the  works  to  the  port  of  shipment,  providing  for  free 
delivery  by  the  carriers  within  the  usual  lighterage  or 
railroad  delivery  limits  of  the  port,  and  the  tender  of 
such  ship's  receipt  or  railroad  bill  of  lading  shall  be  full 
and  final  delivery.  In  every  case,  the  purchaser  agrees 
to  furnish  the  seller,  promptly  after  the  sailing  of  the 
vessel,  with  a  Custom  House  bill  of  lading  properly 
signed,  checked  and  endorsed,  as  evidence  of  exportation. 

In  case  the  seller  elects  to  tender  to  purchaser  the 
usual  ship's  receipt,  the  purchaser  agrees  to  furnish 
seller,  immediately  on  the  arrival  of  the  goods  at  port 
of  loading,  the  name  of  vessel  by  which  shipment  is 
desired;  and  the  seller  undertakes  to  place  the  goods 
alongside  vessel,  if  sufficient  time  is  allowed  tlie  railroad 
or  transportation  company,  and  the  vessel  in  question 
will  receive  them,  but  the  seller  does  not  assume  any 
liability  for  expenses  arising  from  failure  of  the  railroad 
or  transportation  company  to  make  delivery  within  the 
specified  time. 

In  case  the  purchaser  does  not  supply  the  seller, 
promptly  upon  arrival  of  goods  at  port  of  loading,  with 
name  of  vessel  and  such  other  shipping  instructions  as 
may  be  necessary,  or,  in  case  purchaser  designates  a 
vessel,  of  which  the  date  of  sailing  is  such  that  material 
cannot  be  held  on  cars  or  in  railroad  warehouse  without 
charges   accruing,    (1)    any   demurrage   or  other  charges 


TECHNIC  OF  EXPORT  TRADE 


143 


made  by  the  railroad  company  for  detention  of  cars^ 
unloading,  storage,  etc.,  and  any  damage  to  the  goods 
consequent  upon  such  detention  or  unloading  will  be  for 
purchaser's  account  and  risk,  and  (2)  the  seller  may, 
at  its  option,  tender  to  purchaser  an  order  on  the  railroad 
company  to  deliver  the  goods  to  the  purchaser  at  the 
railroad  dock,  and  the  tender  of  such  delivery  order  shall 
be  full  and  final  delivery. 


Execution  of 
Orders  or 
Shipment  of 
Goods 


Specifications 
and  Shipping 
Instructions 


Inspection 

XT— 11 


3-a.  The  seller  shall  not  be  liable  for  failure  to  perform 
this  contract  in  whole  or  in  part,  if  such  failure  is  due  to- 
fires,  strikes,  disputes  with  workmen,  war,  civil  commo- 
tion, epidemics,  floods,  accidents,  delays  in  transportation, 
shortage  of  cars  or  other  causes  beyond  the  reasonable 
control  of  the  seller  or  of  the  manufacturer;  nor  shall 
these  exemptions  be  limited  or  waived  by  any  other 
terms  of  this  contract  whether  printed  or  written;  such 
contingencies  shall  not  release  the  purchaser  from  his 
obligation  to  pay  for  the  goods  in  accordance  with  the 
terms  of  sale.  Provided,  however,  that  in  the  event  of 
such  unavoidable  delay  the  purchaser  may,  subject  to 
previously  obtaining  the  consent  of  tlie  seller,  cancel  such 
portion  of  the  goods  already  specified  as  is  not  manu- 
factured nor  in  process  of  manufacture  at  the  time  his 
request  to  cancel  reaches  the  manufacturer's  works. 

2-b.  The  seller  maj'  ship  any  portion  of  the  goods  as 
soon  as  completed  at  the  manufacturer's  plant,  and  pay- 
ment for  that  portion  of  the  goods  shipped  shall  become 
due  in  accordance  with  the  terms  of  payment  herein 
specified.  Insistence  upon  suspension  of  manufacture 
or  suspension  of  any  shipment  if  not  acquiesced  in  by 
the  seller  may  be  treated  by  the  seller  as  a  wrongful 
termination  of  the  contract  on  the  part  of  the  purchaser; 
and  the  purchaser  shall  thereupon  be  liable  for  all 
damages  arising  out  of  such  termination. 

:5.  In  the  event  of  the  purchaser  failing  to  furnish  com- 
plete specifications  and  instructions  within  the  time 
specified  in  the  contract,  the  seller  shall  be  entitled,  at 
its  option,  to  cancel  such  portion  of  the  contract  as  may 
remain  miexecuted,  or  to  make  shipments  in  accordance 
with  the  specifications  and  instructions  which  the  pur- 
chaser may  have  furnished  for  previous  shipments  on 
account  of  the  same  or  a  previous  contract. 

4.  If    the   purchaser    requires    inspection,    it    must   be 


144 


FOREIGN  TRADE 


Damage  in 
Transit 


General 


made  at  manufacturer's  plant,  and  such  inspection  and 
acceptance  shall  be  final.  Reasonable  facilities  will  be 
afforded  to  inspectors  representing  the  purchaser  to 
inspect  material  and  to  apply,  previous  to  shipment  from 
the  manufacturer's  plant,  tests  to  which  the  seller  has 
previously  agreed. 

Claims  5.  Claims  will  be  considered  by  tlie  seller  only  when 

made  promptly  after  receipt  of  the  goods  and  due  op- 
portunity has  been  given  for  investigation  by  seller's 
own  representatives.  No  claims  for  labor  nor  involving 
consequential  damages  will  be  recognized.  Goods  must 
not  be  returned  except  by  permission  of  seller. 

6.  The  seller  agrees  that  the  goods  shall  leave  the 
manufacturer's  plant  in  good  condition,  and  the  purchaser 
assumes  all  risks  of  rust  or  other  damage  during 
transportation. 

7.  The  goods  are  to  be  exported  to  the  destination 
stated  by  the  purchaser  at  the  time  the  inquiry  is  made, 
and  the  purchaser  guarantees  that  the  goods  will  be 
shipped  to  that  destination,  and  agrees  to  furnish,  if  re- 
quired by  the  seller,  a  Landing  Certificate  duly  signed  by 
the  Customs  Authorities  at  the  port  of  destination,  certi- 
fying that  the  goods  have  been  landed  and  entered  at  that 
port. 

The  seller  reserves  the  right,  even  after  partial  pay- 
ment on  account  of  any  contract  with  the  purchaser,  to 
require  from  the  purchaser  satisfactory  security  for  the 
due  performance  of  his  obligations,  and  refusal  to  furnish 
such  satisfactory  security  or  the  failure  of  the  pur- 
chaser to  execute  any  of  his  obligations  under  this  or  any 
other  existing  contract  will  entitle  the  seller,  upon  notice 
to  the  purchaser,  to  suspend  shipments  or  cancel  the  con- 
tract, or  so  much  of  it  as  may  remain  unexecuted,  without 
prejudice  to  any  claim  for  damages  the  seller  may  be 
entitled  to  make. 

Terms  8.  Unless  otherwise  stated  in  quotation,  seller's  terms 

are  understood  to  be  net  cash  in  exchange  for  rela- 
tive ship's  receipt,  to  be  tendered  to  bankers  approved 
by  the  seller  with  whom  irrevocable  credit  is  to  be  es- 
tablished when  order  is  entered  and  before  goods  are 
manufactured. 


9.  Every  quotation  is  based  on  the  understanding  that, 


TECHNIC  OF  EXPORT  TRADE 


145 


jf  accepted  and  the  seller  should  elect,  formal  con- 
tract satisfactory  to  the  seller  will  be  signed  by  the  pur- 
chaser. 


United  States  Steel  Products  Company 
general  office  new  york,  u.  s.  a. 

Exporters   of  the   Products  of 


Carkegie  Steel  Co. 
Ilxixois   Steel  Co. 
Abiericax  Steel  &  Wire  Co. 
Americax   Sheet  &   Tix   Plate   Co. 
Texne.ssee  Coai^  Irok  &   Railroad  Co. 
No 


American-  Bridge  Co. 
The   Loraix  Steel  Co. 
National  Tube  Co. 
Shelby  Steel  Tube  Co. 

1!) 


CONTRACT   COVERING   SAI^E   OF    BY 

UNITED  STATES  STEEL  PRODUCTS  CO. 
To     


Description 


Price 


Pavment 


Quality 


Specifications 


Time  of 
Shipment 


Specifications   shall  be  furnished  to  the  seller  by  the 
buyer  in  substantial  equal  monthly  quantities,  beginning 

on  or  before  the  first  day  of 19 .    . . 

and  ending  on  or  before  the  last  day  of  . 

19....  Buyer's  failure  to  furnish  specifications,  as 
aforesaid,  may  at  seller's  option,  without  notice  to 
buyer,  be  treated  and  considered  as  a  waiver  on  the 
part  of  the  buyer  of  all  right  to  demand  any  subsequent 
deliverj'-  of  the  unspecified  portion  of  the  goods. 


146 


FOREIGN  TRADE 


Remarks 


Conditions 
of  Sale 


Accepted 


This  material  is  produced  in  part  from  manganese  ore 
and/or  chrome  ore  from  British  Possessions,  and  it  is 
understood  and  agreed  that  this  sale  is  subject  to  the 
restrictions  of  the  "consumer's  guarantee  for  ores."  See 
our  circular  letter  of  April  30,  1916. 

This  contract  is  subject  to  General  Conditions  of  Sale 
printed  on  back  hereof. 

It  is  understood  that  the  seller  does  not  manufacture 
the  materials  mentioned  herein,  but  is  to  obtain  them 
from  such  manufacturers  as  it  may  select.  Such  selec- 
tion shall  be  in  the  absolute  discretion  of  the  seller  and 
shall  in  no  way  affect  any  of  the  pro\isions  of  this  con- 
tract, but  this  right  shall  not  relieve  the  seller  from  its 
obligation  to  furnish  material  of  the  kind  and  quality 
and  at  the  cost  herein  specified. 

UNITED  STATES  STEEL  PRODUCTS  CO. 


GENERAL  CONDITIONS  OF  SALE 
The  seller  referred  to  in  these  Conditions  of  Sale  is 
understood  to  be  the  UNITED  STATES  STEEL  PROD- 
UCTS COMPANY. 

C.  L  F.  L  Tl^e  seller  accepts  no  responsibility  for  the  arrival 

and  of  goods  at  destination  or  for  loss  or  damage  in  transit. 

C.  &  F.  Sales  The  purchaser  assumes  all  risks  of  transportation  except 
such  as  are  covered  by  the  legal  responsibility  of  the 
carriers  (or,  on  c.  i.  f.  sales,  by  the  insurance),  and  ac- 
cepts and  agrees  to  all  usual  and  customary  clauses 
in  the  bills  of  lading  as  well  as  such  additional  clauses 
and  stipulations  as  may  be  lawfully  imposed  by  the 
carriers  as  a  condition  of  their  accepting  the  goods  for 
transportation.  The  tender  to  the  purchaser  or  his 
authorized  agent  of  shipping  documents,  consisting  of 
proper  bills  of  lading,  and,  in  the  case  of  c.  i.  f.  sales, 
negotiable  insurance  certificate,  constitutes  full  and  final 
delivery  on  the  part  of  the  seller,  and  entitles  it  to  im- 
mediate payment  in  full  for  goods  shipped,  without 
prejudice  to  the  subsequent  adjustment  of  just  claims 
on  the  part  of  the  purchaser. 

Unless  otherwise  agreed  in  writing,  the  purchaser  will 
receive  the  goods  at  destination  ex  ship's  tackles  as  fast 
as  vessel  can  discharge,  and  it  is  further  agreed  that  the 
seller  is  entitled  to  select  the  route,  port  of  shipment  and 


TEriINK   OF  EXPORT  TRADE 


u: 


Consular 
Invoices 


vessel  with  privilege  of  stopping  in  transit  at  port  or 
ports.  Unless  otherwise  agreed  in  writing,  any  charges 
at  destination,  including  lighterage,  wharfage  or  landing 
charges,  dues,  duties,  etc.,  are  not  included  in  seller's 
price. 

Insurance  2.  Unless  otherwise  stated  in  quotation,  the  insurance 

on  c.  i.  f.  sales  is  understood  to  be  marine  insurance  only 
to  destination  covered  by  sales  price,  free  of  particular 
average,  English  conditions,  for  a  sum  equal  to  the 
amount  of  the  invoice  plus  ten  per  cent.  Other  forms  of 
insurance,  if  obtainable,  must  be  agreed  upon  in  writing 
prior  to  acceptance  of  order,  the  additional  cost  to  be 
for  the  account  of  the  purchaser,  but  no  form  of  insur- 
ance will  protect  against  rust  or  other  damage  unless 
caused  by  a  peril  of  the  sea. 

3.  All  consular  fees  for  legalising  invoices,  stamping 
bills  of  lading  or  other  documents  required  by  the  laws 
of  the  countries  of  destination,  are  payable  by  the  pur- 
chaser and  are  not  included  in  the  seller's  prices.  If 
not  otherwise  arranged,  the  seller  is  authorised  to  pay 
same  for  purchaser's  account,  and  add  the  cost  to  the  in- 
voice. 

Seller  will  take  out  consular  documents  as  agent  for 
the  purchaser,  who  must  state  how  the  goods  are  to  be 
declared,  and,  if  the  purchaser  does  not  furnish  the  neces- 
sary instructions,  seller  will  make  declaration  according 
to  its  best  judgment,  but  will  not  in  any  case  be  respon- 
sible for  any  fines  or  other  charges  due  to  errors  or  in- 
correct declarations. 

Execution  of  4-a.  The  seller  shall  not  be  liable  for  failure  to  per- 

Orders   of  form  this  contract  in  whole  or  in  part,  if  such  failure 

Shipment  of       is  due  to  fires,  strikes,  disputes  with  workmen,  war,  civil 
Goods  commotion,  epidemics,  floods,  accidents,  delays  in  trans- 

portation, shortage  of  cars  or  other  causes  beyond  the 
reasonable  control  of  the  seller  or  of  the  manufacturer; 
nor  shall  these  exemptions  be  limited  or  waived  by  any 
other  terms  of  this  contract  whether  printed  or  written; 
such  contingencies  shall  not  release  the  purchaser  from 
his  obligation  to  pay  for  the  goods  in  accordance  with 
the  terms  of  sale.  Provided,  however,  that  in  the  event 
of  such  unavoidable  delay  the  purchaser  may,  subject 
to  previously  obtaining  the  consent  of  the  seller,  cancel 
such  portion  of  the  goods  already  specified  as  is  not 
manufactured  nor  in  process  of  manufacture  at  the  time 


148 


FOREIGN  TRADE 


Specifications 
and  Shipping 
Instructions 


Inspection 


Claims 


Damage  in 
Transit 


General 


his  request  to  cancel  reaches  the  manufacturer's  works. 
4-b.  The  seller  may  ship  any  portion  of  the  goods 
as  soon  as  completed  at  the  manufacturer's  plant,  and 
payment  for  that  portion  of  the  goods  shipped  shall  be- 
come due  in  accordance  with  the  terms  of  payment  herein 
specified.  Insistence  upon  suspension  of  manufacture 
or  suspension  of  any  shipment  if  not  acquiesced  in  by 
the  seller  may  be  treated  by  the  seller  as  a  wrongful 
termination  of  the  contract  on  the  part  of  the  purchaser; 
and  the  purchaser  shall  thereupon  be  liable  for  all 
damages  arising  out  of  such  termination. 

5.  In  the  event  of  the  purchaser  failing  to  furnish 
complete  specifications  and  instructions  within  the  time 
specified  in  the  contract,  the  seller  shall  be  entitled,  at  its 
option,  to  cancel  such  portion  of  the  contract  as  may 
remain  unexecuted,  or  to  make  shipments  in  accordance 
with  the  specifications  and  instructions  which  the  pur- 
chaser may  have  furnished  for  previous  shipments  oa 
account  of  the  same  or  a  previous  contract. 

6.  If  the  purchaser  requires  inspection,  it  must  be 
made  at  manufacturer's  plant,  and  such  inspection  and 
acceptance  shall  be  final.  Reasonable  facilities  will  be 
afforded  to  inspectors  representing  the  purchaser  to  in- 
spect material  and  to  apply,  previous  to  shipment  from 
the  manufacturer's  plant,  tests  to  which  the  seller  ha^ 
previously  agreed. 

7.  Claims  will  be  considered  by  the  seller  only  when 
made  promptly  after  receipt  of  the  goods  and  due  op- 
portunity has  been  given  for  investigation  by  seller's 
own  representatives.  No  claims  for  labor  nor  involving 
consequential  damages  will  be  recognised.  Goods  must 
not  be  returned  except  by  permission  of  seller. 

8.  The  seller  agrees  that  the  goods  shall  leave  the 
manufacturer's  plant  in  good  condition,  and  the  pur- 
chaser assumes  all  risks  of  rust  or  other  damage  during 
transportation. 

9.  The  goods  are  to  be  exported  to  the  destination 
stated  by  the  purchaser  at  the  time  the  inquiry  is  made, 
and  the  purchaser  guarantees  that  the  goods  will  be 
shipped  to  tliat  destination,  and  agrees  to  furnish,  if  re- 
quired bj--  the  seller,  a  Landing  Certificate  duly  signed 
by  the  Customs  Authorities  at  the  port  of  destination, 


TPX'HXIC  OF  EXPORT  TRADE  149 

certifying  that  the  goods  have  been  landed  and  entered 
at  that  port. 

The  seller  reserves  the  right,  even  after  partial  pay- 
ment on  account  of  any  contract  with  the  purchaser,  to 
require  from  the  purchaser  satisfactory  security  for  the 
due  performance  of  his  obligations,  and  refusal  to 
furnish  such  satisfactory  security  or  tlie  failure  of  the 
purchaser  to  execute  any  of  his  obligations  under  this 
or  any  other  existing  contract  will  entitle  the  seller  upon 
notice  to  the  purchaser,  to  suspend  shipments  or  cancel 
the  contract,  or  so  much  of  it  as  may  remain  unexecuted, 
without  prejudice  to  any  claim  for  damages  the  seller 
may  be  entitled  to  make. 

10.  Unless  otherwise  stated  in  quotation,  seller's  terms 
Terms                   are  understood  to  be  net  cash  in  exchange   for  relative 

documents  mentioned  herein  to  be  tendered  to  bankers 
approved  by  the  seller  with  whom  irrevocable  credit  is 
to  be  established  when  order  is  entered  and  before  goods 
are  manufactured. 

11.  Every  quotation  is  based  on  the  understanding 
that,  if  accepted  and  the  seller  should  elect,  formal  con- 
tract satisfactory  to  the  seller  will  \)e  signed  by  the 
purchaser. 

6.  The  indent. — Suppose,  now,  that  the  sample  and 
prices  have  been  found  satisfactory  and  an  order  has 
been  placed.  The  manufacturer  has  secured  the  or- 
der either  directly  thru  the  foreign  buyer,  or  else  thru 
a  middleman,  generally  a  commission  house.  In  the 
second  case,  the  indent,  or  foreign  order,  may  be 
either  an  open  indent  or  a  closed  indent.  A  closed 
indent  specifies  the  firms  from  which  the  goods  are  to 
be  purchased,  while  the  open  indent  leaves  to  the  dis- 
cretion of  the  merchant  or  the  commission  house  the 
choice  of  the  source  of  supplies. 

A  typical  indent  states  the  quantity  and  nature  of 
the  goods,  the  price  (if  it  is  known  to  the  buyer),  the 
firm  from  which  the  goods  are  to  be  obtained  {if  it  is 


160  FOREIGN  TRADE 

a  closed  indent) ,  the  marks  to  be  used  on  the  packages 
and  documents,  the  date  of  shipment  or  of  arrival  (if 
the  order  is  urgent)  and  often  the  method  of  payment. 
The  indent  is  numbered  by  the  foreign  buyer,  and  the 
number  is  usually  included  in  the  mark  placed  on  the 
packages  and  documents. 

For  example,  if  the  indent  is  received  by  an  export 
commission  house,  it  usually  takes  the  following 
course  thru  the  various  departments.  After  it  has 
passed  thru  the  mail-clerk's  office  in  the  commission 
house,  it  goes  first  to  the  credit  man,  who  takes  notice 
of  the  methods  of  payment  and  passes  judgment  in 
regard  to  the  credit.  If  the  order  is  satisfactory,  it  is 
passed  on  to  the  buyer,  whose  duty  it  is  to  learn  the 
prices  and  then  purchase  the  goods  from  the  manufac- 
turer. The  amount  of  freedom  he  will  have  in  pur- 
chasing will  depend  on  the  nature  of  the  indent. 
From  the  buyer  the  order  passes  to  the  bookkeeping- 
department;  at  this  stage  it  is  recorded  on  an  index 
card.  A  copy  goes  to  the  shipping  clerk;  this  copy 
enables  him  to  follow  up  the  shipment  and  attend  to 
the  receipt  of  goods  at  the  seaboard,  the  arrangements 
for  freight  space  and  the  making  out  of  the  ocean 
bill  of  lading.  Finally,  a  copy  is  sent  to  the  invoice 
clerk  in  order  that  he  may  make  out  the  invoice,  draw 
the  draft  and  take  out  the  insurance  papers.  From 
him  the  order  passes  to  the  correspondent,  whose  duty 
it  is  to  write  the  letters  which  must  accompany  the 
various  documents  that  go  with  the  shipment. 

7.  Standardizing  the  order. — As  a  rule,  all  indents, 


TECHNIC  OF  EXPORT  TRADE  151 

whether  they  are  received  by  a  commission  house,  a 
merchant  or  a  manufacturer,  must  be  put  into  a  form 
which  will  make  them  suitable  for  the  purposes  of  the 
business.  If  the  order  is  in  a  foreign  language  that 
is  not  familiar  to  the  majority  of  the  clerical  force,  it 
has  to  be  translated.  If  it  is  contained  in  a  letter,  it 
has  to  be  put  into  the  proper  form,  before  it  can  be 
started  on  its  route  thru  the  various  departments. 
In  most  cases,  therefore,  a  special  form  is  used  for  the 
original  order.  Several  copies  are  made  out,  each 
copy  on  paper  of  a  distinctive  color. 

The  first  step,  after  the  receipt  of  an  order,  is  the 
acknowledging  of  it.  The  second  step  is  to  inform 
the  various  departments  carefully  about  all  details 
concerning  the  nature  of  the  shipment — for  example, 
order  nimiber,  marks  to  be  placed  on  cases,  the  desti- 
nation and  the  kind  of  packing  required.  If  one  or- 
der requires  the  sending  of  several  packages,  each 
package  is  marked  with  the  order  number  arid,  in  ad- 
dition, is  given  a  serial  letter  that  shows  its  relation  to 
the  rest  of  the  shipment. 

The  acceptance  of  the  order  should  be  acknowl- 
edged on  a  special  blank  and  should  include  all  the 
details  of  the  order  as  given  by  the  customer.  It 
should  also  include  clear  statements  in  regard  to  ship- 
ping routes,  manner  of  packing,  amount  and  kind  of 
marine  insurance,  consular  declarations  and  similar 
details.  If  such  statements  are  made,  there  is  httle 
probability  that  the  buyer  will  be  disappointed  in  any 
way. 


152  FOREIGN  TRADE 

8.  Packing  for  export. — Special  attention  should 
be  given  to  the  packing  of  export  goods.  If  specific 
instructions  are  given,  they  should  be  scrupulously 
followed.  Even  if  the  American  or  Canadian  ship- 
per may  not  understand  the  reason  for  certain  instruc- 
tions, and  may  be  convinced  that  his  idea  of  packing 
is  better  than  that  suggested  by  the  foreign  customer, 
he  should  nevertheless  complj^  with  the  consignee's  re- 
quest. In  all  cases,  the  peculiar  conditions  of  the 
country  to  which  the  order  is  sent  should  be  kept  in 
mind.  When,  for  instance,  the  goods  have  to  be 
carried  overland  on  pack  animals,  the  size  of  the  cases 
should  be  adapted  to  the  carrying  capacity  of  the 
pack  animal  which  is  used  in  the  country  of  destina- 
tion. For  example,  a  package  that  has  to  be  carried 
by  a  native  carrier  should  not  weigh  more  than  90 
pounds.  The  load  for  a  donkey  should  not  exceed 
100  pounds.  For  a  mule,  the  load  is  from  100  to  150 
pounds ;  and  for  a  camel,  from  400  to  500  pounds.  It 
should  also  be  remembered  that  such  packages  should 
generally  be  divided  into  equal  halves,  so  that  half 
may  be  loaded  on  one  side  of  the  animal,  and  half  on 
the  other. 

Climatic  conditions  should  be  given  due  considera- 
tion. Seeds  that  have  to  cross  the  tropical  zone  must 
be  protected  against  the  heat  and  humidity  that  pre- 
vail in  these  regions.  Also,  careful  attention  should 
be  given  to  the  question  of  economy  in  the  size  of 
the  packages,  in  order  that  the  entire  order  may  not 
occupy  more  space  in  the  steamer  than  is  absolutely 


TECHXIC  OF  EXPORT  TRADE  153 

necessary.  In  this  connection  it  is  important  to  re- 
member that  the  steamship  company  charges  accord- 
ing either  to  weight  or  to  measurement,  choosing  that 
standard  according  to  which  they  can  make  the  highest 
freight  charge. 

The  state  of  civilization  obtaining  in  the  country  of 
destination,  and  the  particular  susceptibilities  of  the 
inhabitants  must  also  be  considered.  Careful  regard 
for  these  factors  will  often  determine  the  color  of  the 
packing  when  goods  are  sent  to  a  more  or  less  unciv- 
ilized country,  for  certain  color  prejudices  exist 
among  primitive  peoples  which  can  seriously  affect 
the  salability  of  goods.  In  China,  green  and  black 
are  considered  unlucky ;  therefore  these  colors  should 
not  be  used  on  packages  sent  to  that  country.  There 
is  a  story  of  a  German  who  captured  the  Chinese  soap 
market  by  selling  his  soap  in  a  yellow-dragon  wrapper. 

The  choice  of  the  kind  and  color  of  the  package 
depends  also  upon  whether  the  goods  are  consigned  to 
a  wliolesale  merchant,  a  retailer  or  an  individual  con- 
sumer. It  should  always  be  kept  in  mind,  however, 
that  attractive  packing,  careful  boxing  and  artistic 
labeling  will  considerably  increase  the  natural  selling 
power  of  any  merchandise ;  in  some  cases,  any  one  of 
these  factors,  or  all  of  them  combined,  may  influence  a 
prospective  customer  to  buy.  Some  of  the  European 
countries  lay  special  stress  upon  good  packing,  and 
the  reports  of  the  consular  officers  of  many  commer- 
cial countries  reveal  again  and  again  the  effect  that 
good  packing  has  upon  salability.     Invariably,  at- 


154  FOREIGN  TRADE 

tractive  packages  have  an  important  advertising  value. 

9.  Weights  and  measurements. — Another  subject 
which  calls  for  special  attention  on  the  part  of  the 
exporting  manufacturer  or  merchant,  is  that  which 
has  to  do  with  the  exact  statement  of  the  weights  and 
measurements  of  the  exported  goods.  It  should  be 
kept  in  mind  that  in  all  countries,  except  in  the  Orient 
and  in  Great  Britain  and  her  colonies,  weights  arc 
expressed  by  means  of  the  metric  system.  Of  late,  a 
special  effort  has  been  made  to  introduce  this  system 
more  generally  into  this  country.  A  report  was  re- 
cently prepared  by  the  director  of  The  Bureau  of 
Standards  in  Washington,  D.  C,  for  the  use  of  the 
International  High  Commission  on  the  Uniformity  of 
Laws.  It  might  be  a  surprise  to  find  how  many  large 
American  exporters  are  already  using  the  metric  sys- 
tem, in  some  cases  for  both  domestic  and  foreign 
trade.  Now  that  the  metric  system  has  been  adopted 
in  Europe,  Latin  America  and  China,  this  country 
will  find  itself  more  and  more  at  a  disadvantage  with 
respect  to  the  units  of  weight  and  measure  unless  it 
also  makes  use  of  the  same  system. 

10.  Marking  the  goods.— The  question  of  how 
goods  should  be  marked  must  be  carefully  taken  into 
account  if  infraction  of  the  "merchandise  marks"  laws 
is  to  be  avoided.  Some  countries  are  extremely  strict 
in  this  matter.  In  Australia,  the  Commonwealth 
Commerce  Act  provides  that  a  trade  description 
must  be  branded  on  certain  goods  or  affixed  by  a  label : 
this  "description"  indicates  the  country  in  which  the 


TECHNIC  OF  EXPORT  TRADE  155 

goods  were  manufactured,  and  the  materials  of  which 
they  were  made.  In  Australia,  the  most  detailed 
regulations  are  issued,  with  reference  to  almost  all 
classes  of  goods.  In  Sweden,  it  is  not  allowable  to 
print  on  the  goods  any  Swedish  name  unless  there 
is  also  a  clear  statement  of  the  country  in  which  tlie 
g-oods  originated.  Any  infringement  of  this  rule, 
which  is  for  the  protection  of  the  manufacturer,  re- 
sults in  the  immediate  confiscation  of  the  entire  ship- 
ment. These  examples  clearly  show  the  importance 
of  the  manufacturer's  being  thoroly  acquainted  with 
the  marking  regulations  of  various  countries  with 
which  he  deals. 

In  addition  to  knowing  the  regulations  with  respect 
to  the  marking  required  by  the  governments  of  the 
importing  countries,  the  exporter  should  be  very  care- 
ful to  inform  himself  in  regard  to  all  marking  de- 
manded by  the  foreign  customer.  Generallj^  each 
package  should  bear  the  order  number  and  the  initials 
of  the  exporting  firm  within  a  diamond  or  triangle. 
In  no  case  should  the  port  mark,  the  mark  that  indi- 
cates the  port  to  which  the  shipment  is  consigned,  be 
omitted. 

11.  hivoicing. — Finally  the  matter  of  invoicing 
must  be  thoroly  understood.  According  to  the  kind 
of  trading  method  employed  and  the  nature  of  the 
price  quoted,  one  of  the  following  fonins  of  invoices 
is  used: 

Loco  Invoice;  showing  cost  of  goods  at  place  of 
purchase. 


156  FOREIGN  TRADE 

r.  O.  B,  Invoice;  showing  values  free  on  board 
steamship. 

C.  &  F.  Invoice;  showing  cost  of  freight. 

C.  I.  F.  Invoice;  showing  cost  of  freight  and  in- 
surance. 

Franco-domicile  Invoice;  showing  cost  of  freight 
when  dehvered  at  the  purchaser's  warehouse,  and  in- 
cluding all  charges  to  the  port  of  destination,  as  well 
as  import  duties  and  transport  charges  from  the  port 
of  discharge  to  the  place  of  final  destination,  if  that 
place  is  in  the  interior. 

The  Franco-domicile  invoice  is  similar  to,  some- 
times identical  with,  the  "f.  o.  b.  destination"  invoice. 
The  loco  invoice  is  sometimes  called  an  "f.  o.  b.  fac- 
tory" invoice. 

The  export  invoice  differs  in  several  respects  from 
the  domestic  invoice.  For  example,  the  former  in- 
cludes code  words,  spaces  for  numbers,  w^eight  meas- 
urements, the  foreign-money  value  of  the  total  ship- 
ment and  the  signature  of  the  shipper.  For  this  rea- 
son, it  is  advisable  to  use  for  export  invoices,  forms 
that  are  different  from  those  used  in  domestic  trade. 
Additional  details  are  required  in  the  case  of  invoices 
used  for  special  markets.  Thus,  for  shipments  to 
Australia,  New  Zealand  or  South  Africa,  the  invoice 
should  show  the  charges  for  the  following  items ;  box- 
ing, crating,  cartage  from  factory  to  railroad  station, 
and  the  freight  transportation  from  local  station  to 
the  port  of  shipment.  The  laws  of  these  countries 
require  that  these  detailed  statements  be  made,  no 


TECHNIC  OF  EXPORT  TRADE  157 

matter  how  the  manufacturer  quotes  his  prices.  The 
placing  of  the  signature  at  the  bottom  of  the  export 
invoice  is  always  desirable,  often  absolutely  necessary. 
12.  Sundry  documents. — Besides  the  invoice,  vari- 
ous documents  have  to  be  made  out.  There  are  the 
statement  of  charges,  the  memorandum  of  measure- 
ment and  weight,  and  the  paper  that  bears  the  ship- 
ping and  financial  advice.  There  are  always  some 
charges  which  have  to  be  billed  to  foreign  customers, 
and  which  are  not  included  in  the  quoted  price.  These 
are  enumerated  in  a  special  statement;  it  is  better  to 
make  this  statement  on  a  special  form  rather  than  to 
write  it  on  the  face  of  the  invoice  itself.  Such  charges 
might  include  petties — for  example,  the  cost  of  post- 
age and  cablegrams,  and  charges  for  freight  and  extra 
packing — provided  these  are  not  included  in  the  price 
quoted.  The  packing  list — sometimes  called  the 
measurement  notes — is  of  special  interest  in  connec- 
tion with  the  steamship  service,  and  is  especially  val- 
uable to  importers  when  a  shipment  is  made  up  of  a 
large  number  of  packages.  Sometimes  it  is  neces- 
sary to  supply  certificates  of  inspection,  analysis, 
weight  and  count.  These  are  most  often  used  with 
shipments  of  oil,  grain,  lumber  and  similar  commodi- 
ties. Certificates  of  this  kind  and  the  statement  of 
charges  are  usually  demanded  by  the  banker  who  me- 
diates the  payment  for  the  shipment,  which  is  gen- 
erally made  by  draft.  When  payment  is  made  in  this 
way,  the  shipper  uses  a  special  form  to  advise  the  for- 


158  FOREIGN  TRADE 

eign  customer  that  a  draft  has  been  drawn.     This  is 
known  as  the  shipping  and  financial  advice. 

REVIEW 

What  policies  are  to  be  recommended  in  regard  to  sending  sam- 
ples? 

Why  does  the  price  policy  in  exports  differ  from  that  in  domes- 
tic   trade  ? 

Explain  the  difference  between  c.  i.  f.  and  f.  o.  b.  shipments. 

Describe  the  indent  or  foreign  order. 

What  considerations  should  be  followed  in  packing  goods  for 
foreign  shipment  ? 

How  does  the  diversity  of  weights  and  measures  operate  to  the 
disadvantage  of  the  American  exporter.^ 

What  is  the  nature  of  tlie  rules  of  foreign  countries  in  regard 
to  marking  goods? 

Describe  the  invoice  used  in  foreign  trade. 


CHAPTER  VIII 

THE  TECHNIC  OF  EXPORT  TRADE  (Continued) 

I.  Inland  transportation. — If  the  exporting  manu- 
facturer is  located  in  an  inland  city  the  consignment 
has  to  be  moved  to  the  seaboard,  in  most  cases  by  rail. 
The  part  that  each  of  the  various  agents  plays  in  con- 
nection with  the  inland  transportation  of  shipments 
in  foreign  trade,  was  discussed  in  the  preceding  chap- 
ter. In  the  present  chapter,  therefore,  the  question 
of  agency  is  disregarded,  and  only  the  method  of  han- 
dling the  shipment  is  considered.  When  a  shipment 
from  the  interior  is  made,  either  a  thru  bill  of  lad- 
ing or  a  local  railroad  bill  of  lading  is  used.  In  the 
former  case  the  local  representative  of  the  railroad 
company,  its  foreign  freight  agent,  engages  freight 
space  and  attends  to  all  the  details  of  the  arrange- 
ment for  ocean  transportation.  The  local  railroad  bill 
of  lading  merely  covers  the  transportation  from  the 
manufacturer's  plant  to  the  seaport.  If  the  goods  are 
shipped  on  this  kind  of  bill  of  lading,  the  person  whose 
duty  it  is  to  attend  to  the  shipment  at  the  seaboard  is 
notified  in  regard  to  the  time  the  shipment  is  due  at 
the  coast,  and  is  expected  to  attend  to  sending  it  on 
without  unreasonable  delay. 

Bills  of  lading  for  goods  shipped  to  foreign  parts 

XV — 12  ]  59 


160  FOREIGN  TRADE 

should  be  marked  "For  export."  In  case  of  carload 
shipment  to  New  York,  they  should  bear  the  direc- 
tions "For  export,  lighterage  free."  This  specifica- 
tion insures  for  the  shipment  the  special  attention  that 
railroads  try  to  give  export  shipments,  which  includes 
free  storage  for  fifteen  days  instead  of  for  forty-eight 
hours.  Their  purpose  in  making  these  special  allow- 
ances is  to  provide  for  delays  in  connections — such  as 
the  delay  that  occurs  when  goods  fail  to  arrive  in  time 
for  shipment  on  the  right  steamer. 

The  carting  from  the  railroad  station  to  the  ship's 
pier  will  often  be  arranged  for  by  the  railroad  com- 
pany itself.  In  many  cases,  however,  it  will  be  more 
economical  for  the  buyer  to  employ  the  services  of  a 
foreign-freight  forwarder  or  of  a  carting  company 
that  handles  goods  for  foreign  shipment.  It  should 
not  be  forgotten  that  if  a  thru  bill  of  lading  is  not 
used,  the  seaboard  agent  who  is  to  take  care  of  the 
shipment  must  be  supplied  with  a  copy  of  the  railroad 
bill  of  lading,  officiallj'-  signed.  A  duplicate  of  the 
bill  of  lading  is  sometimes  used  as  the  shipping  order. 
In  such  an  event,  the  railroad  keeps  one  copy  for  bill- 
ing purposes,  and  the  shipper  keeps  another  in  his  files 
as  a  memorandum. 

A  new  law  concerning  the  railway  bill  of  lading 
went  into  effect  January  1,  1917.  Under  the  pres- 
sure of  the  demand  for  a  stricter  regulation  of  the 
rules  governing  the  use  of  bills  of  lading,  from  bank- 
ing houses,  chambers  of  commerce,  legal  and  indus- 
trial associations,  farmers'  councils  and  other  organi- 


TECHNIC  OF  EXPORT  TRADE  161 

zations,  Congress  passed  the  Bill  of  Lading  Act, 
known  as  the  Pomerene  Bill.  This  act  renders  the 
hill  of  lading  more  easily  negotiable  by  transferring 
the  liability  for  a  fraudulent  bill  from  the  bank  to  the 
railroad. 

2.  ''Straight"  and  "order"  bills  of  lading.— The 
Bill  of  Lading  Law  discriminates  between  the 
"straight"  bills  of  lading,  which  have  to  do  with  a 
shipment  consigned  to  a  specific  person,  and  the  "or- 
der" bill  of  lading,  which  is  used  with  a  shipment 
consigned  to  the  order  of  a  named  person.  Of  these 
two  types  only  the  order  bill  is  negotiable,  and  this  is 
negotiable  only  if  its  negotiability  is  not  nullified  by 
a  special  clause. 

Only  one  of  the  conditions  that  appear  on  the  back 
of  the  bill  of  lading  needs  special  attention.  This 
states  that  a  claim  relating  to  a  lost  shipment  will  be 
considered  only  if  made  in  writing  by  either  the  ship- 
per or  the  consignee,  and  within  four  months  after  a 
reasonable  time  has  been  allowed  for  the  value  of  the 
shipment  to  be  estimated.  If  a  claim  is  not  filed 
within  the  specified  time,  the  carrier  cannot  be  held 
liable.  A  shipper,  however,  in  order  to  protect  him- 
self against  loss,  includes  in  his  tracer  a  clause  that 
automatically  turns  the  tracer  into  a  claim  if  the  ship- 
ment is  not  received  within  a  certain  period. 

3.  "Thru"  bills  of  lading.— ''Thru''  railway  bills  of 
lading  can  be  obtained  to  practically  all  European 
ports,  and  to  some  other  ports  of  the  world.  In  some 
cases,  thru  billing  can  be  obtained  from  the  American 


162  FOREIGN  TRADE 

railroads  to  inland  points  in  foreign  countries.  Gen- 
erally speaking,  billing  thru  to  inland  points  is  not 
the  most  economical  arrangement  that  can  be  made. 
As  a  matter  of  fact,  few  large  importers  at  inland 
points  in  foreign  countries  are  anxious  to  have  ship- 
ments consigned  to  their  domicile  on  thru  bills  of  lad- 
ing. They  usually  prefer  shipments  c.  i.  f.  foreign 
seaport,  since  they  can  make  more  profitable  arrange- 
ments for  the  shipment  of  the  goods  from  the  foreign 
seaport  inland  than  is  offered  by  the  American  rail- 
road that  quotes  the  thru-bill  rate. 

4.  Bills  of  lading  in  Canada. — The  Canadian  regu- 
lations in  regard  to  bills  of  lading  are  to  be  found  in 
the  Bill  of  Lading  Act,  Revised  Statutes  of  Canada 
(1906),  Chapter  118;  the  Water- Carriage  of  Goods 
Act  (1910) ;  and  the  conditions  in  regard  to  uniform 
bills  of  lading  approved  by  the  Board  of  Railroad 
Commissioners,  Order  No.  7562  (1909). 

The  same  distinction  is  made  between  "straight" 
and  "order"  bills  of  lading,  and  only  the  latter  are 
negotiable.  There  is  also  the  same  provision  for  deal- 
ing with  claims,  relating  to  lost  shipments.  But  the 
Pomerene  Bill  goes  much  further  in  transferring  the 
liability  for  a  fraudulent  bill  from  the  bank  to  the 
common  carrier.  At  the  last  annual  meeting  of  the 
Canadian  Bankers'  Association,  it  was  decided  to 
bring  before  the  Minister  of  Trade  and  Commerce  a 
proposal  to  enact  legislation  in  Canada  on  exactly  the 
same  lines. 

5.  TJie  ''London  Clause"  charge. — What  seems  to 


TECHNIC  OF  EXPORT  TRADE  163 

be  a  discrimination  against  Canadian  seaports  is  the 
"London  Clause"  which  forms  part  of  all  outgoing 
bills  of  lading  issued  by  the  North  Atlantic  shipping 
companies.  It  is  an  extra  charge  on  all  goods  car- 
ried to  the  Port  of  London.  The  Port  of  London 
authority,  contrary  to  the  general  impression,  receives 
no  part  of  this  charge.  It  would  seem  that  this  clause 
should  be  eliminated  if  Canadian  ti*ade  is  not  to  be  re- 
stricted, especially  as  United  States  shippers  had  this 
same  clause  taken  out  of  United  States  bills  of  lading 
in  1902. 

6.  Ocean  rates. — Ocean  freight  rates  and  chartering 
Avill  be  treated  in  special  chapters  in  the  latter  part  of 
this  Text.  Reference  is  made  here  to  only  a  feAv 
technical  details  concerning  the  rates  for  foreign  ship- 
ments. Tlie  shipper  should  realize  that  there  are  tAvo 
kinds  of  ocean  freight  rates;  they  are  either  net  or 
subject  to  a  charge  of  five  or  ten  per  cent,  which  is 
known  as  ''primage."  This  charge  originally  repre- 
sented a  gift  made  to  the  captain  or  the  crew  of  a 
vessel  for  the  careful  loading  and  handling  of  a 
specific  shipment.  Later  on,  the  same  amount  was 
given  to  shipping  agents,  also  as  a  reward  for  taking 
special  care  of  a  shipment.  And  today  it  simply 
forms  a  part  of  one  of  the  standard  rates.  Thus  a 
rate  of  50  shillings  plus  ten  per  cent  is  exactly  the 
same  as  a  rate  of  55  shillings.  But  the  practice  of 
quoting  primage  is  gi-adually  waning,  and  it  is  prob- 
able that  before  long  all  rates  will  be  quoted  flat. 

7.  Routine  of  making  the  shipment. — Even  if  the 


164  FOREIGN  TRADE 

services  of  an  agency  of  forwarders,  commission 
houses  or  merchants  are  secured,  the  manufacturer 
or  his  export  manager  should  be  thoroly  familiar  with 
the  routine  followed  in  making  the  shipment,  and 
acquainted  with  various  formalities  of  the  process,  in 
order  that  he  may  check  the  work  of  those  who  repre- 
sent him.  The  following  brief  description  may  prove 
of  some  value  to  the  reader. 

First  of  all,  it  is  necessary  for  the  shipper  to  engage 
freight  room.  If  lie  does  this  after  he  has  made 
inquiry  concerning  rates  for  a  specific  shipment,  it  is 
considered  that  he  has  accepted  the  rate  quotation 
made  by  the  carrier.  Nevertheless,  the  steamship 
company  should  be  definitely  informed  on  the  ship- 
per's acceptance  of  terms,  in  order  that  definite 
provision  may  be  made  for  taking  the  goods  on  board. 
Every  effort  should  be  made  to  have  the  shipment 
ready  at  the  stated  time,  since  otherwise  the  shipper 
will  be  charged  for  "dead  space"  without  getting  any 
value  in  return  for  the  payment  that  he  has  made. 
Furthermore,  delay  means  that  the  goods  have  to 
await  the  next  steamer.  Under  such  circumstances 
they  may  be  held  up  for  several  weeks,  and  the  buyer 
may  suffer  great  inconvenience,  if  not  actual  loss. 

8.  DocuTnents. — Various  documents  are  used  by 
the  steamship  companies  in  connection  with  the 
receipt  of  goods  for  shipment.  The  first  one  is  a 
shipping  permit  (see  page  165),  by  which  the  receiv- 
ing clerk  at  the  steamsliip  dock  is  authorized  to  receive 
from  a  given  firm  a  specified  amount  of  merchandise, 


TECHNIC  OF  EXPORT  TRADE  165 

SHIPPING  PERMIT 

tf-S  S  *  Attention  of  shippers  is  called  to 

2tn     —  Section  235  of  the  Criminal  Code  of 

"g      g-^  the  United  States  with  regard  to  the 

o  .•  2  To  THE  Receiving  Clekk.        shipment  of  explosives  or  other  dan- 

•a  S  -^t^  gerous  articles. 

t'%  i  I     S.S WHITE  STAR  WHARF 

«^-1  °  PIER  NORTH  RIVER 

^  H      a 
o  ^  S  J 

.2-°-^  i-  Receive  from 

•^  o  o 

2  "o!l      To  6^  delivered 

S  c  — ^ 

t,  ^-^  o  It  is  understood  that  this  engagement  is  on  the  condition  that  delivery 

o  o  5  shall  be  made  promptly  at  the  time  called  for  in  this  permit  or  space  will 
5g  °5  H  not  be  reserved,  and  the  steamer  and  its  agents  shall  be  absolved  from 
S.  ^  2—  any  and  all  liability  arising  out  of  the  issuance  of  or  under  this  permit, 
"ocJ  — ■'Sbi)  including  any  liability  that  may  arise  on  account  of  the  steamer's  pro- 
°  o  ==  ^  ci   ceeding  to  sea  without  the  goods. 

•Ei|£«  WHITE  STAR  LINE 

q  New  York,  19  Pee 

to  be  delivered  at  a  certain  time.  A  shipper  will 
experience  difficulty  in  getting  his  shipment  on  board 
the  steamer  without  a  shipping  permit.  The  next 
document  is  the  dock  receipt  (see  following  page) 
which  merely  signifies  that  a  certain  consignment  has 
been  received  by  the  receiving  clerk.  This  receipt  is 
exchanged  for  the  comj)any's  bill  of  lading  before  the 
departure  of  the  steamer  by  which  the  goods  are  sent ; 
the  exchange  takes  place  at  the  steamship  company's 
office. 

The  next  documents  to  be  considered  are  used  in 
connection  with  the  clearing  of  the  goods  thru  the 
custom  house.  The  steamship  company  is  not  per- 
mitted to  issue  the  bills  of  lading  until  these  papers 
are  filled  out  satisfactorily.  The  United  States  gov- 
ernment, as  well  as  almost  all  other  governments, 


166 


FOREIGN  TRADE 


Ooei 

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TECHNIC  OF  EXPORT  TRADE  167 

requires  for  statistical  uses  a  shipper's  export  declar- 
ation (see  below),  which  states  the  name  of  the 
ship  by  which  the  goods  are  to  be  sent,  the  destination, 
the  number  of  packages,  the  marks  that  are  used  on 
the  packages,  the  kinds  of  goods  and  their  value. 
The  statement  of  these  particulars  is  made  under  oath. 
Xo  oath  is  required  in  connection  with  declarations  for 
export  by  vessel  if  the  total  value  of  the  shipment 
does  not  exceed  $100.  It  is  specifically  provided  that 
these  declarations  may  be  made  by  an  authorized 
agent  of  the  shipper.  In  the  case  of  shipments  from 
interior  points  for  export  on  thru  bills  of  lading,  the 
declaration  may  be  transmitted  to  the  seaboard  with 
the  shipping  papers. 

SHIPPER\S  EXPORT  DECLARATION 

PREPARATION  OP  EXPORT  DECLARATION  (R^ad  Carefully). \ 


L  THE  SHXPPE&  MT7ST  PRBPA&S  THIS  EXPORT  DEOLARATIOM  aod  nbseribe'to  tho  oath  btton  \  eostoau 
•fficer,  aotarj,  or  other  aathorlzed  officer.  Tbo  deelaratioD  must  bo  tigoed  bj  the  shipper,  bat  the  oath  ma;  be  omitted  oo  aoj  ahip* 
ofteot  for  exportatloD  hj  Teasel  II  the  total  valne  of  the  items  does  not  eic«ed  $100  and  on  shipmesta  regardless  of  value  to  Canada 
or  Mexico  hj  «ar,  vehicle,  or  hnj.  If  the  declaiatioo  la  execnted  by  an  agent  for  the  shipper  the  authority  must  be  in  wrttmg  on 
this  declaration  or  other  docnment  filed  ^th  the  Collector.  The  valaea  and  names  of  shippers  may  be  omitted  from  the  duplicate, 
bat  mast  always  appear.on  the  original.  The  eri£:inal  is  for  vae  of  customs  officers  and  will  be  treated,  as  eoDfideatial  and  informa- 
tion not  disclosed  without  written  authority  of  the  shipper  or  his  agent.  Export  statistiea  are  compiled  from  these  declarations 
and  all  data  required  en  the  prescribed  form  most  be  furnished. 

X  DOHESTZa  ARTICLES  EXPORTED.— The  raloe  of  all  articles  grcmt,  prodaced,  er  manufactured  in  whole  or  part  la 
the  United  States  must  be  stated  in  the  column  of  "U.  S.  Products." 

X  rOREIQN  ARTIOLl^S  EXPORTED.— The  value  of  articlea  of  foreign  origin  shipped  out  of  the  United  State*  in  the 
same  condition  as  imported  must  be  suted  in  the  column  of  "Foreign  Products."  If  foreign  articles  are  subjected  to  any  process 
of  manufacture  or  alteration  in  the  United  States  they  become  United  States  products  and  must  be  reported  as  euch.  Thos:  Im- 
ported raw  sugar  refined  in  the  United  States  should  be  reported  a«  a  domestic  product. 

4.  THE  VALT7B  OF  ARTICLES  to  ba  stated  ia  the  aelUag  or  invoice  price  or  the  actual  cost  or  true  market  ralue  at  tha 
iimo  and  place  of  shipment  for  exportation. 

6.  DESCRIPTION  Of  ARTICLES  EXPORTED  most  be  accurate  and  complete.  General  terms  such  as  dry  goods,  gro- 
ceries, meats,  machinery,  miHinery,  etc.,  will  sot  be  accepted.  In  the  ease  of  cheese  the  declaration  must  9tat»  whether  filled  or 
onfiUed,  oleomargarine  whether  colored  or  oncolored,  butt«r  whether  pure,  aaulterated,  or  renovated. 

6.  THE  mRD  07  PACXAGES  as  bDXbs.  barrels,  etc,  and  the  net  weight  exclusive  of  outer  coverings,  must  be  specified. 

7.  TH£  TOTAL  QUANTITY  of  each,  article  expressed  in  the  oaual  meaaure  of  pounds,  yards,  gallons,  etc.,  must  be  state<f. 
Oomeetie  spirits  exported  most  b«  stated  in  gallons  of  50  per  cent  alcoholic  atrength. 

8.  THE  COtTNTRT  OF  FINAL  DESTINATION  OF  GOODS — that  ia,  the  country  to  which  goods  are  sold— nttst  b« 
ahovm.  Special  care  should  be  exercised  to  state  the  final  destination  of  goods  shipped  through  Canada  to  Europe,  and  of  goods  to 
ba  transshipped  in  the  United  Kingdom,  the  Netherlands,  Germany  and  France  en  route  to  other  eouatriea. 

9.  INSPECTION  CERTIFICATES. — Process  butter  or  batter  adulterated  or  renovated  most  be  accompanied  by  eertiflcata 
of  purity  Issued  by  the  United  States  inspector  of  dairy  prodacts.  Certificate  of  inspection  must  be  presented  to  the  Collector  fo» 
neat  and  meat  food  prodocts  exported  when  required  by  tho  regulations  of  the  Department  of  Agriculture. 

10.  EXPORT  5GREDTTLE  B  may  ba  obtained  free  of  charge  from. the  Bureau  of  Foreign  and  Domestic  Commerce,  Depart*' 
Bank  of  Commerce,  Wuhlngtoo,  D.  C,  and  will  be  of  much  assistance  to  exporters, 

U.  SALE  AND  PRINTINQ  OF  BLANKS.- Shippers  export  declarations  may  be  obtained  from  Collectors  of  Customs  at  tb» 
price  of  two  for  one  cent  or  $5X0  per  thousand.  The  export  declarations  may  be  printed  by  private  parties  providing  they  am^ 
fom  strictly  to  the  official  foBLla  width,  wording,  color,  and  arrangement 


168  FOREIGN  TRADE 


SHIPPING  INSTRUCTIONS   (R^d  Care(uUy). 


L  SHZPMEHTS  FROM  IKTERIOR  POINTS  FOR  EXPORTATIOM.-If  shipped  on  a  through  blU  of  ladln?,  the  ship- 
fter  most  prepare  the  original  export  declaration  and  attached  carrier's, extract  and  delirer  both  fonns  to  the  carrier  to  accom- 
pany the  shipping  pap<^rB  to  the  port  of  exportation.  If  shipped  on  a  local  bill  of  lading,  the  doclaratios  and  extract  may  be 
attached  thereto  or  mailed  ecparately  to  the  consignee  at  the  seaboard. 

(a)  If  the  shipper  prefers,  ho  may  place  the  original  declaration,  but  cot  the  earner's  extract,  Id  a  sealed  csvelope  addressed 
to  the  Collector  of  Costoms  with  his  name  indorsed  thereon  and  the  fact  of  sealing  -noted  od  the  declaration  and  deliver  it  with  the 
extract  to  the  carrier.  If  goods  are  consigned  to  an  agent  at  the  seaboard 'for  transshipment  and  eiportatiou  the  shipper  may 
mail  the  declaration  and  extract  properly  prepared  direct  to  the  agent. 

(&)  Upon  arrival  of  the  goods  at  the  port  of  exportation,  the  c&rrier  mcst  immediately  deliver  the  original  dedaraUons,  sealed 
«nd  nnse&lcd,  and  the  carrier's  extracts  to  the  CoUector  of  Customs  who  will  retain  the  original  aod  certify  the  extract  and  retcrs 
it  to  the  carrier,  vessel,  or  party  named  to  attend  to  erportation. 

2.  EXPORTING  VESSEL  OR  CARRIER.— Care  shoald  be  exercised  \a  ree^viog  goods  destined  for  foreign  eoustries  or 
con-contiguous  territories  not  accompanied  by  certified  extracts  or  original  declarations,  as  clearance  niU  not  be  granted  nntil  the 
export  dedaratione  have  been  filed  with  the  Collector  or  bond  given  to  prodnee  the  same.  The  certiBed  extracts  moat  be  attachct} 
to  the  vessel's  manifest  or  car  manifest  or  copy  of  waybill  when  presented  for  clearance. 

3.  CZP0RTATI0N3  FROM  SEABOARD  OR  BORDER  FORTS.— The  shipper  at  the  eeabo&rd  or  border  may  deliver 
or  mail  the  original  declaration  and  extract  to  the  Collector,  who  will  retain  the  original  end  eertifr  the  extract  and  deliver  Lt  to 
the  shipper,  vessel,  or  party  named  to  attend  to  exportation. 

4.  SHIPPER'S  DECLARATIONS  AND  EXTRACTS  ARE  NOT  REQUIRED  on  withdrawals  from  teod^d  w&rebooM 
for  exportation  or  on  any  shipments  under  customs  bond  for  exportation  or  for  transportation  and  exportation. 

6.  SHIPMENTS  FROM  ALASKA.  HAWAII,  OR  PORTO  RICO  TO  THE  0NITED  STATES  FOR  TRANSSHIP. 
HENT  AND  EXPORTATION  should  be  treated  in  the  same  manaer  as  shipments  from  interior  points  and  the  declaration 
and  attached  extract  must  accompany  the  coastwise  manifest  for  delivery  to  the  Collector  at  the  port  of  transshipment  and  expor- 
tation. 

€.  BEFORE  A  CLEARANCE  SHALL  BE  GRANTED  FOR  ANT  VESSEL  bound  to  a  foreign  port,  the  owners,  ship- 
pers, or  consignors  of  the  cargo  of  such  vessel  shall  deliver  to  the  Collector  manifests  (or  declarations)  of  the  cargo  of  the  parts 
thereof  shipped  by  them  respectively,  and  dball  verify  the  same  by  oath.  Such  manifest  (or  declarations)  shall  specify  the  kinds, 
quantities,  and  values  of  the  articles  and  the  foreign  port  or  country  of  destination.     (See  sec  4200,  Rev.  Stats.,  U.  S.) 

If  any  vessel  bound  to  a  foreign  port  departs  on  her  voyage  irithoot  delivering  manifest  and  obtaiaing  clearance,  the  master 
or  other  person  tn  charge  shall  be  liable  to  a  penalty  of  $500  for  every  such  offense.     tSeo  sec.  4197,  Rev.  Stats.,  U.  8.) 

Similar  provisions  apply  to  exportations  by  rail,  vehicle,  ^r  ferry.     ^Sce  sec  1,  act  March  3,  2893.) 

7,  TO  THE  COLLECTOR:  I  hereby,  authorize v. 

•ddreso  -. - .to  act  as  my  agent  for  eoatoms  purposes  ia 

the  exportation  of  the  wi thin; described  goods.     Please  deliver  the  certified  duplicate  accordingly. 


Skipptr. 

The  exact  details  of  the  requirements  in  regard  to 
the  statements  to  be  made  before  the  custom-house 
officials,  are  given  in  a  government  publication  called 
"Shippers'  Export  Declaration  and  Export  Pro- 
cedure," which  is  one  of  the  Treasury  "decisions." 
This  decision  contains  special  provisions  for  goods 
shipped  imder  any  form  of  customs  bond  for  exporta- 
tion from,  or  in  transit  thru,  the  United  States. 
Since  the  statistical  data  regarding  such  shipments 
can  be  obtained  from  the  customs  papers,  no  declara- 
tion is  required  for  goods  so  shipped. 

Many  American  manufacturers  fail  to  realize  that 


TECHNIC  OF  EXPORT  TRADE  1G9 

certain  advantages  can  be  secured  by  making  ship- 
ments of  this  kind  in  bond.  This  is  true  of  products 
that  are  subject  to  inter-revenue  taxes,  as  well  as  of 
l)roducts  that  are  partly  or  wholly  manufactured  from 
imj^orted  materials  upon  which  duty  has  been  paid. 
In  order  to  increase  the  salability  of  such  goods,  the 
United  States  ^  grants  to  products,  which  are  ex- 
ported in  bond,  exemption  from  internal  revenue 
taxes,  and  allows  a  so-called  "drawback"  of  99  per 
cent  of  the  duty  paid  on  these  manufactures,  which 
consist  partly  or  wholly  of  imported  crude  or  semi- 
crude  material.  Beer,  liquors  and  tobacco  are  typical 
products  of  this  kind.  It  is  true  that  the  manufac- 
turer has  to  comply  with  a  number  of  technicalities  in 
order  to  secure  the  benefit  of  these  allowances,  but  the 
drawback,  or  the  tax  exemption  means  either  a  direct 
addition  to  the  profit  of  the  manufacturer,  or  else  a 
greater  profit  thru  increased  sales  due  to  a  price  re- 
duction brought  about  by  means  of  these  facilities. 

9.  Sieamsliip  hill  of  lading. — Having  fulfilled  all 
tlie  requirements  of  the  customs  authorities,  the  ex- 
porter can  obtain  the  steamship  bill  of  lading  in  ex- 
change for  his  dock  receipt  (see  inserted  illustra- 
tion). This  bill  of  lading  is  a  valuable  document, 
because  it  conveys  title  to  the  goods.  The  Pomerene 
Act  applies  to  ocean  bills  of  lading  with  the  same 
force  as  it  does  to  railroad  bills  of  lading.     The  bill 

1  There  is  a  similar  provision  in  the  Canadian  Customs  Act  (see  "The 
Customs  Tariff,  1907,  Sect.  10,  and  Schedule  B.— also  later  amendments). 
In  most  cases  the  drawback  allowed  is  99  per  cent  of  the  duty  paid,  but 
in  some  cases  only  50  per  cent,  and  in  one  case  65  per  cent. 


170  FOREIGN  TRADE 

of  lading  is  drawn  up  on  a  special  form  supplied  by 
the  steamship  company,  and  usually  from  three  to 
eight  copies  are  prepared,  some  of  which  are  ne- 
gotiable. The  negotiable  copies  are  placed  in  the 
hands  of  the  banker,  who  finances  the  shipment  or 
attends  to  collecting  payment.  The  banker  must 
have  a  "full  set" — that  is,  all  the  negotiable  copies  that 
have  been  issued.  If  there  should  be  any  other  ne- 
gotiable copies  those  in  the  possession  of  the  banker 
would  become  worthless,  since  the  title  to  the  goods 
may  be  transferred  by  means  of  a  single  negotiable 
copy.  Each  of  the  negotiable  copies,  therefore,  con- 
tains a  statement  as  to  how  manj'-  bills  of  lading  of 
the  same  kind  and  of  the  same  date  of  issue  have  been 
prepared. 

The  non-negotiable  copies  serve  various  purposes. 
For  example,  they  are  used  for  the  records  of  the 
shipper  and  the  steamship  company,  for  the  custom- 
er's information,  and  for  fulfilling  the  requirements  of 
foreign  consulates. 

The  bill  of  lading  is  generally  made  out  directly  in 
the  name  of  a  foreign  consignee  under  the  following 
circumstances:  when  the  consignee  has  actualty  paid 
cash,  or  has  otherwise  arranged  for  security  or  guar- 
antee before  shipment  of  the  goods ;  or  when  the  ship- 
ment is  made  on  open  account. 

The  consignee  himself  negotiates  the  order  bill  of 
lading  by  his  own  indorsement  if  the  bill  is  di-awn 
directly  to  his  order.  If,  however,  it  is  made  out  to 
the  shipper,  the  latter's  indorsement  is  necessary  of 


TECHNIC  OF  EXPORT  TRADE  171 

course,  before  the  bill  can  be  passed  to  any  other  per- 
son. The  indorsement  can  be  made  either  to  the  or- 
der of  a  particular  person  or  bank,  or  it  can  be  made 
in  blank.  Altho  one  negotiable  copy,  properly  in- 
dorsed, is  sufficient  to  convey  title  to  the  goods,  the  en- 
tire set  should  be  indorsed. 

There  is  no  uniform  stjde  for  ocean  bills  of  lading. 
They  vary  according  to  the  carrier  that  issues  them, 
and  according  to  the  conditions  and  customs  prevail- 
ing at  the  port  of  destination.  Each  steamship 
company  specifies  its  own  terms,  which,  however,  are 
always  made  subject  to  change,  owing  to  the  sharp 
competition  between  the  various  lines. 

10.  "Four  and  '"clean"  bills  of  lading.— The  differ- 
ence between  the  "foul"  and  the  "clean"  bill  of  lading 
will  bear  explanation.  The  former  is  issued  when 
part  of  the  shipment  is  found  to  be  damaged  in  any 
way.  It  is  decidedly  to  the  shipper's  interest  to  pack 
his  goods  in  such  a  way  that  the  issue  of  a  foul  bill  of 
lading  will  be  rendered  impossible,  for  any  reference 
to  bad  packing  or  damaged  goods  places  a  stain  upon 
the  document  in  the  eyes  of  many  foreign  bankers,  and 
may  result  in  serious  difficulties. 

In  order  to  obtain  a  "clean"  bill  of  lading,  an  ex- 
porter sometimes  gives  a  "letter  of  indemnity." 
The  letter  is  attached  to  that  copy  of  the  bill  of  lading 
which  is  kept  by  the  shipping  company  for  future 
reference,  and  is  sent  back  to  the  exporter  if  any 
claims  are  made  against  the  steamship  company 
because  of  imperfections  in  the  shipment. 


172  FOREIGN  TRADE 

11.  Consular  invoices. — Finally,  the  governments 
of  foreign  countries  require  another  group  of  docu- 
ments— the  consular  invoices  and  the  certificates  of 
origin.  Practically  all  South  American  Republics 
demand  that  these  papers  accompany  all  imports  of 
foreign  goods. 

The  Federal  Trade  Commission,  realizing  the 
importance  of  tariff  laws  and  regulations  in  the 
development  of  American  export  trade,  made  a  thoro 
investigation  of  tariffs  and  other  trade  regulations 
imposed  by  the  governments  of  Brazil,  Uruguay, 
Argentina,  Chile,  Bolivia  and  Peru.  Their  report, 
which  was  published  in  June,  1916,  contains  a  wealth 
of  reliable  and  detailed  information.  Many  fac- 
similies  are  used  to  show  various  forms  that  are  used 
for  recording  customs  imports — for  example,  consular 
declarations,  transfer  documents  and  certificates  of 
origin.  No  manufacturer  who  wishes  to  take  part  in 
a  large  way  in  the  export  trade  with  these  countries, 
should  fail  to  take  advantage  of  the  information  thus 
made  available. 

The  following  are  some  of  the  documents  that  for- 
eign consuls  in  America  are  authorized  to  give:  the 
consular  invoice  proper,  consular  attestation  of  usual 
invoice  or  certification  of  invoice  bill  of  lading,  certifi- 
cate of  origin,  and  non-dumping  certificate.  A  con- 
sular invoice  generally  includes  the  same  details  as 
an  ordinary  commercial  invoice  made  out  in  the 
language  of  the  country  of  destination.  The  number 
of  copies  required  varies  from  two  to  eight.     This 


TECHNIC  OF  EXPORT  TRADE  173 

invoice  contains  a  full  description  of  the  merchandise 
represented  in  the  shipment.  For  example,  the 
Brazilian  consular  invoice  requires  the  following  es- 
sential details : 

1.  Name  and  nationality  of  carrying  vessel. 

2.  Port  of  shipment  of  merchandise. 

3.  Port  of  destination  of  merchandise. 

4.  Port  of  destination  of  merchandise,  with  option  for 
.  or  in  transit  for 

5.  Total  value  of  invoice,  including  approximate  freight 
charges. 

6.  Approximate  freight  and  shipping  charges. 

7.  Rate  of  exchTange,  premium  or  agio   of  currency  of 
country  whence  goods  are  exported. 

8.  Marks  and  numbers  of  packages. 

9.  Quantity  or  number  of  packages. 

10.  Class  of  packages. 

11.  Specification  of  merchandise  in  accordance  with 
Article  XIII,  Chapter  IV,  law  No.  1,103  of  November  21, 
1903,  which  provides  that  "goods  nmy  be  described  either 
in  accordance  with  the  official  nomenclature  accomj>anying 
these  regulations  ...  or  in  accordance  with  commercial 
usage,  but  with  separate  specifications  of  each  article  accord- 
ing to  its  material." 

12.  Gross  weight  of  the  package  in  kilograms. 

13.  Gross  weight  of  the  merchandise.  Par.  2,  art.  20, 
*'Preliminary  Dispositions  of  the  Tariff." 

14.  Other  units  of  the  tariff  on  which  duties  are  based. 

15.  Declared  value  of  each  item  or  article  described,  in- 
clusive of  freight  and  charges. 

16.  Country  of  origin  of  each  article. 

As  an  illustration  we  give  a  Brazilian  Consular  In- 
voice as  filled  out  in  practice  ( from  Report  of  Federal 
Trade  Commission) . 


174 


FOREIGN  TRADE 


Federal  Trade  Commission. 


I'Via. 


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FACTURA  CONSUUR  BRAZILEIBA.   (BRAZILIAN  GONSUIAR  INYOIGEJ^ 


fc 


<&0n*ViltCbe   (Serai  em   ilvttpool. 

OBCI<AR.AC&0       (DBCZ.AR&TZOM). 

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eu  earregaJartt 

«r  thifftn 

dot  nurcadcriat  mtnciotuuUu  netla  factura  etmlidat  Hot                   W  tolunut 

*/   M*    minlianAu     tpuifU    m    Ota   nmM,    entaaud    m    1*4                        I  ftcttf" 

indicttiot,  a    quat   I   exacta  I    verdaJeira   a    todot   et    tffeilot,     \mio    *jsas  mercadonas 
mJicaltd,          mkult       u       m       ttt        nifccU           Mm        tad        uac/,          Mt         mtnkmdwi       btme 

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duhnid     It     Ot$      pari        of  \J 

cot   Srtt 


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Agnt        tt        Rxporttr 


j2i&Ukt:iJU^l~^!^(f<*^ 


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. A'inw  atJ  nalwnality  oj  $atUng  v**ut 

Jiomt  t  MacioHoiidad*  do  navia  d  vafor. 

Kami  aid  mlimaUly  o/  ilumtr 

fcrle  do  emharque  da  mtnadoria 

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fitri  oJ  itilinalun  oJ  /A«  mtrthaadiit 

<Porto  do  deslino  da  mercadoria  __, 

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7'orlo  do  deslino  da  mercadoria ent  transilo  para 

Pvri  cf  duthatwH  0/  tkt  mtri/iandue  m  tra^tuhr 

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Otiirrajoet  do  Consul 
■XejaJise  a  frejenU /actun  nSo  dhitanU  rteuMrtm'ta 
C3  espertaioru  <  dar  a  etpeeificacio  da  mercadoria- 
de  cm/ormidado  com  a    UUra  K.  da   art.    13,   i» 
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ViS10.—ContuUd»  OirtI  d»  Republlet  dot  Eitiios  Unldoa  do  Bruit -em  Urereool  lu 


•  LMWM.Mt 


BRAZILIAN  CONSULAR  INVOICE  AS  FILLED  OUT  IN  PRACTICE.    (FRONT.) 


TECHNIC  OF  EXPORT  TRADE 


175 


XV— 13 


176  FOREIGN  TRADE 

12.  Certificates  of  origin. — Those  governments 
whose  tariff  laws  show  discrimination  in  favor  of  goods 
sent  from  certain  countries,  require  certificates  of 
origin.  The  import  duty  on  goods  from  the  favored 
countries  is  comparatively  small.  In  order,  then, 
that  discount  may  not  be  allowed  on  merchandise  that 
is  not  entitled  to  it,  a  certificate  of  origin  is  required. 
In  some  cases  the  ordinary  consular  invoice  covers  all 
statements  required  for  this  purpose;  under  such 
circumstances,  of  course,  it  is  unnecessary  to  issue  a 
special  certificate  of  origin. 

13.  Other  certificates;  special  regulations. — A  cer- 
tificate of  origin  is  sometimes  temporarily  required,  in 
accordance  with  quarantine  and  "phyllopera"  regu- 
lations, when  any  country  or  district  is  afflicted  with  a 
plague  or  an  epidemic.  The  purpose  of  the  require- 
ment is  to  enable  the  authorities  at  the  port  of  destina- 
tion to  tell  by  means  of  the  certificate  whether  or  not 
the  goods  come  from  a  locality  that  is  affected. 

Besides  certificates  of  origin,  certificates  showing 
that  the  value  declared  in  the  invoice  is  accurate  are 
required  at  times. 

In  certain  British  possessions,  the  desire  to  guard 
against  the  "dumping"  of  foreign  goods  (resulting  in 
underbidding)  has  led  to  the  use  of  so-called  "non- 
dumping"  certificates.  These  are  required  in  Aus- 
tralia, New  Zealand,  South  Africa  and  Canada.  A 
certificate  of  this  kind  reads  somewhat  as  follows : 

I  declare  that  the  values  which  appear  on  the  body  of  this 
invoice  represent  at  the  date  of  the  invoice  what  would  be 


TECHNIC  OF  EXPORT  TRADE  177 

the  open  market  value  of  these  goods  if  they  were  sold  for 
home  consumption  in  the  United  States,  and  that  the  dis- 
counts shown  are  the  same  as  those  granted  on  similar  quan- 
tities sold  for  consumption  in  the  United  States. 

Canadian  inspectors  frequently  visit  American 
manufacturers  who  export  to  Canada,  examine  their 
books  and  compare  the  values  given  in  the  export 
declarations  with  the  recorded  prices  that  these 
exporters  charge  American  buyers. 

Special  regulations  concerning  the  importation  of 
food,  drugs,  arms  and  ammunition  often  exist,  and 
full  particulars  in  regard  to  such  reflations  should 
be  obtained  by  manufacturers  who  export  to  countries 
where  they  are  in  force.  Special  regulations  also 
govern  the  international  sugar  trade  as  a  result  of  the 
Brussels  Sugar  Convention. 

REVIEW 

State  the  advantages  and  disadvantages  of  export  shipments 
from  inland  points  on  thru  bills  of  lading,  and  of  local  bill  of 
lading  to  port  of  departure. 

If  the  importer  lives  in  an  interior  city  is  it  best  to  ship  on  a 
thru  bill  of  lading,  to  destination  or  to  the  most  convenient  port  ? 

Describe  the  documents  incident  to  shipping,  the  shipping  per- 
mit, dock  receipt  and  shipper's  export  declaration. 

What  is  a  shipment  in  bond,  and  what  are  its  advantages? 

Describe  the  steamship  bill  of  lading. 

W^hat  do  consular  invoices  usually  contain,  how  are  they  issued 
and  what  purpose  do  they  serve  ? 


CHAPTER  IX 

THE  WAR'S  EFFECT  ON  AMERICA'S  FOREIGN  TRADE 

1.  Two  stages  of  the  war. — The  recent  history  of 
the  foreign  trade  of  the  United  States  is  dominated 
by  two  facts ;  the  outbreak  of  the  European  War  and 
the  entrance  of  the  United  States  into  that  war.  We 
entered  the  war  early  in  April,  but  it  was  not  until 
months  later  that  the  whole  weight  of  the  new  bur- 
den made  itself  felt.  So  it  seems  appropriate  to  base 
tlie  discussion  of  the  first  period — when  America's 
trade  was  neutral — upon  the  statistics  of  the  first 
three  years  of  the  war,  the  fiscal  years  beginning  July 
1,  1914,  and  ending  June  30,  1917.  As  the  chief  of 
the  Bureau  of  Foreign  and  Domestic  Commerce  says 
in  his  report  for  1917: 

From  the  beginning  of  the  war  to  the  time  of  our  entrance 
-nto  it,  the  business  of  the  American  exporter  and  manufac- 
turer was  to  make  the  most  of  the  new  opportunities  in  the 
markets  of  non-belligerent  countries,  to  take  wise  and  needful 
steps  in  preparation  for  trade  after  the  war,  and  to  sell 
munitions  and  supplies  to  the  belligerents. 

As  we  have  seen  in  an  earlier  chapter,  the  trade 
expansion  of  the  United  States  into  non-belligerent 
countries  was  not  only  a  matter  of  taking  advantage 
of  a  golden  opportunity,  but  a  necessity  growing  out 
of  the  economic  development  of  the  country.  It 
might  seem  that  the  war  trade  with  Europe  has  elim- 

178 


WAR  AND   FOREIGN  TRADE  179 

inated  or,  at  least,  lessened  this  necessity.  But  noth- 
ing is  further  from  the  truth.  The  war  trade  has 
resulted  in  an  enormous  growth  of  our  manufactiu'ing 
capacit}'.  This  growth  has  not  merely  emphasized, 
but  lias  perhaps  doubled  the  pressure  of  our  indus- 
tries' need  of  foreign  markets.  When  we  therefore 
give  ourselves  up  to  the  spell  of  the  fabulous  figures 
which  our  foreign  trade  has  reached,  it  behooves  us 
to  remember  that  they  impose  an  obligation  on  Amer- 
ican manufacturers  and  exporters  to  find  new  markets 
which  will  absorb  the  war  trade  when  war  will  have 
ceased. 

2.  Americas  foreign  trade  in  recent  years. — The 
growth  of  America's  foreign  commerce  for  the  last 
27  years,  is  shown  in  the  following  table : 

HOW    FOREIGN     COMMERCE    HAS    GROWN 

Total  Trade  Credit  Balance 

1917 $9,050,000,000  $3,250,000,000 

1916 7,825,000,000  3,097,000,000 

1915  5,326,077,067  1,768,883,677 

1914  3,902,900,051  324.,348,049 

1913  4,276,614,772  691,421,812 

1912  4,217,291,048  581,144,938 

1911  3,624,885,906  560,167,586 

1910 3,429,163,055  303,354,753 

1909 3,203,719,369  252,677.921 

1908 2,869,209,534  636,461,360 

1907  3,346,596,025  500,256.385 

1906 3,118,745,006  477,741,862 

1905  2,805,135,345  447,846,245 

1900 2,307,095,827  648,796,399 

1895 1,626,529,483  23,190,789 

1890  1,680,900,274  34,104,822 


180  FOREIGX  TRADE 

Growth  since  1914  is  by  no  means  evenly  distri- 
buted over  the  various  parts  of  the  world.  It  is 
largely  a  result  of  the  war  and  so  the  conclusion  is 
natural  that  Europe  as  the  seat  of  the  war  shows  by 
far  the  greatest  gain  over  the  pre-war  period.  The 
table  on  page  181  shows  that  out  of  a  total  excess  of 
1917  exports  over  those  of  1914  Europe  took  almost 
three-fifths.  It  is  true  that  Asia  gained  more  pro- 
portionately, but  the  absolute  figures  of  its  trade  with 
America  are  so  much  smaller  that  it  is  hardly  fair  to 
compare  the  relative  growth  of  the  two  groups.  The 
other  parts  of  the  world  showed  less  encouraging  in- 
creases, especially  the  record  of  Australia  and  Africa 
is  rather  poor.     (See  table  on  page  181.) 

S.  Trade  with  Europe. — Ein*ope  is  divided  into 
two  belligerent  camps  with  a  third  group  of  neutral 
onlookers.  With  one  group,  the  Central  Powers,  our 
trade  has  as  a  result  of  the  Allies'  blockade  dwindled 
to  practically  nothing.  Thus  15%  of  our  foreign 
trade  Avas  lost, — a  loss  which  at  the  early  part  of  the 
war  was  rather  bitterly  felt  by  some  of  America's 
exporters  and  exporting  producers,  such  as  the  cotton 
trade  for  instance.  But  this  loss  appears  a  mere  trifle 
when  compared  with  the  colossal  gains  made  in  the 
trade  with  the  other  group  of  belligerents,  the  "Al- 
lies". In  1914  we  had  exported  to  these  nations  an 
aggregate  of  less  than  one  billion  dollars  worth  of 
goods.  This  amount  grew  steadily  until  in  1917  the 
enormous  figure  of  $3,885,000,000  was  reached. 

In  the  third  group  we  find  neither  the  dazzling  fig- 


WAR  AND  FOREIGN  TRADE 


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182  FOREIGN  TRADE 

ures  of  the  Allies'  commerce,  nor  the  abrupt  changes 
which  characterize  the  trade  with  the  Central  Powers. 
The  proximity  of  the  neutral  nations  and  their  rela- 
tion to  the  allied  blockade  has  brought  this  trade  into 
the  focus  of  attention.  The  startling  feature  of  this 
development  is  that  four  neutral  countries  adjacent 
to  Germany  gained  just  about  as  much  as  the  Central 
Powers  lost.  These  countries  are  Holland  and  Scan- 
dinavia whose  imports  from  the  United  States  we 
give  in  the  table  below; 

(Last  Three  Figures  Omitted) 

Year  ending 
June  30  Denmark         Norway  Sweden        Netherlands 


1914, 

$16,6T0 

$  9,067 

$14,644 

$112,216 

1916 

79,824. 

39,075 

78,274 

143,267 

1916 

65,873 

63,645 

51,980 

97,476 

1917 

66,729 

82,017 

45,116 

109,504 

While  inflated  prices  have  aifected  the  reported 
values  yet  the  increase  deserves  special  attention.  To 
assume  that  the  increase  has  in  its  entirety  accrued  to 
the  advantage  of  the  Central  Powers  overlooks  tlie 
fact  that  neutral  countries  formerly  imported  large 
amounts  from  those  countries.  Germany,  before  the 
war,  supplied  these  neutrals  with  cotton  goods,  elec- 
tric appliances,  etc.  The  war  stopped  that  trade  and 
thereby  rendered  it  necessary  for  these  countries  to 
import  raw  cotton  and  copper,  etc.,  in  greater  quan- 
tities. Some  increases  of  the  imports  of  food  suj^plies 
are  due  to  this  shifting  of  international  commerce,  but 
the  high  food  prices  ruling  in  Germany  and  Austria 
undoubtedly    induced    the    neutrals    to    supply    the 


WAR  AND  FOREIGN  TRADE       183 

Central  Powers  with  foodstuffs.  What  effect  Amer- 
ica's entrance  into  the  war  had  upon  this  feature  of 
our  European  export  trade  will  have  to  be  discussed 
below. 

The  table  on  page  185  shows  the  distribution  of  our 
European  exports  among  the  most  important  coun- 
tries and  to  the  three  groups :  I.  Central  Rowers,  II. 
Allies,  III.  Neutrals. 

4.  Trade  with  other  continents. — Next  to  Europe, 
South  America  has  attracted  most  attention  as  an 
export  field.  It  is  true  that  our  trade  with  Canada 
and  other  parts  of  North  America  has  grown  more 
rapidly  than  has  our  South  American  trade,  but  that 
growth  is  largely  looked  upon  as  the  natural  result 
of  geographic  proximity.  On  the  other  hand.  South 
America  is  geographically  as  near  to  Europe  as  to 
America,  and  culturally  nearer  to  the  Old  World  than 
to  the  New.  Therefore,  any  gain  that  was  to  be  made 
here  was  an  inroad  into  the  competitor's  field  and  thus 
an  expansion  of  America's  natural  export  field.  The 
following  figures  tell  the  story  of  our  success  in  this 
direction. 

EXPORTS  FROM  UNITED  STATES  TO  SOUTH  AMERICA 

(Millions  of  Dollars) 

f  1906 75.2 

Peace    <^  1907 82.2  Average,     80.4 

[  1908 83.6 

r  1909 76.6 

Peace    <]  1910 93.2         Average,     92.9 

1911 108.9 


184  FOREIGN  TRADE 

r  1912 132.37 

Peace    <  1913 146.1  Average,  134.3 

[1914 124.5 

("1915 99.3 

War      <^  1916 108.2  Average,  179.0 

[1917 257.6 

Progress  in  exports  to  South  America  did  not  keep 
pace  with  the  tremendous  strides  made  by  exports  to 
Europe,  and  hence  South  America's  share  of  the  total 
fell  from  6%  in  1912  to  4.09%  in  1917. 

5.  Nature  of  American  trade. — We  have  seen  hoAv 
the  war  has  affected  the  direction  of  our  foreign  trade. 
But  different  parts  of  the  world  have  different  needs. 
A  change  in  direction  of  trade  necessarily  means  also 
a  change  in  the  nature  of  the  commodities  which  are 
traded.  Official  statistics  divide  exports  and  imports 
into  groups  according  to  the  state  in  which  the 
goods  are:  raw,  finished  and  semi-finished;  and  ac- 
cording to  the  use  to  which  they  are  put;  foodstuffs 
and  other  goods.  In  this  respect  far-reaching  changes 
have  been  wrought  in  the  last  four  years.  In  191 4< 
crude  materials  for  use  in  manufacturing  led  with 
34%  of  the  total,  manufactures  ready  for  consump- 
tion being  a  close  second  with  31.1%.  This  relation- 
ship appears  completely  transformed  in  the  1917 
records.  Here  we  find  that  the  first  group,  the  crude 
materials,  had  dropped  to  11.7%  with  an  actual  in- 
crease in  values  of  $60,300,000,  or  7.6%  while  the 
second  group,  finished  manufactures,  had  risen  to  a 
place  far  above  all  other  groups  with  47.3%  of  the 


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185 


186  FOREIGN  TRADE 

total.  That  is,  almost  half  of  all  our  exports  consists 
of  raw  materials.  The  gain  amounted  to  $2,219,- 
000,000  or  more  than  300%.  The  details  are  cleariy 
seen  in  the  table  given  on  page  187. 

Naturally  such  large  groups  do  not  give  us  a  very 
clear  conception  of  what  our  exports  really  are.  This 
is  especially  true  of  the  largest  item,  that  of  manufac- 
tures. We  have,  therefore,  compiled  a  list  of  those 
partly  or  wholly  manufactured  articles  which  play  the 
most  important  part  in  our  export  trade  today.  For 
the  sake  of  showing  the  growth  over  the  pre-war  years 
Ave  give  the  figures  for  both  1914  and  1917. 

Articles  and  Classes:  Twelve  months  ended  June  30th 

191T  1914 

in  million  doUai-s 

Iron  and  steel  manufactures 1,129.3  251.5 

Explosives    802.8  6.3 

Meat  and  dairy  products 404.1  146.2 

Brass  manufactures   383.3  7.5 

Copper  and  manufactures 322.3  146.4 

Mineral  Oil  refined 223.8  145.4 

Chemicals,  dyes,  etc 182.0  22.7 

Cars,  autos,  etc 166.5  51.7 

Cotton  manufactures    136.3  51.5 

Breadstuifs    112.9  63.1 

Leather  and  manufactures 153.7  57.5 

6.  Imports. — The  values  involved  in  our  export 
trade  are  so  large  that  our  import  trade  tho  also  very 
big  and  growing  rapidly  makes  less  of  an  impression 
on  us.  Indeed  its  growth  during  the  last  three  years 
has  been  much  slower  than  that  of  the  export  trade, 
which  grew  four  times  as  fast,  169%  against  40.5%. 
This  slow  increase  in  the  total,  results  largely  from 


WAR  AND  FOREIGN  TRADE 


187 


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188  FOREIGN  TRADE 

the  actual  decrease  of  European  imports.  The  Cen- 
tral Powers  were  almost  completely  shut  off  from 
the  world  trade  and  the  others  were  too  busy  waging 
war  to  attend  to  the  export  trade.  Thus  Europe 
which  in  1914  sent  us  almost  half  of  our  imports, 
47.3%,  in  1917  sank  to  the  rank  of  Asia — both  con- 
tinents sending  us  23%  and  allowed  North  America, 
that  is  Canada,  Cuba,  Mexico,  etc.,  to  pass  it,  with 
28.4%.  North  and  South  America  and  Asia,  all  in- 
creased by  about  the  same  amount,  namely  by  $338,- 
700,000,  $319,500,000,  and  $328,200,000  respectively. 
Remarkable  also  is  our  rapidly  developing  import 
trade  with  Africa.  The  table  on  page  189  gives  ac- 
curate information  about  all  these  movements. 

From  the  shifting  of  oiu*  main  sources  of  imports 
from  Europe  to  such  countries  as  Mexico,  Cuba,  South 
and  Central  America  and  Asia  we  can  draw  fairly  ex- 
act conclusions  as  to  the  changes  which  the  nature  of 
our  im23orts  had  to  undergo.  Europe,  especially  the 
northwestern  section  is  a  busy  workshop.  It  exports 
little  but  manufactured  commodities.  The  other 
countries  mentioned  above  on  the  other  hand  are 
natural  supply  sources  for  raw  materials.  So  a  shift 
from  Europe  to  South  America  and  Asia,  etc.,  means 
a  shift  from  manufactures  to  crude  materials.  Sta- 
tistics corroborate  our  assumption.  In  1914  crude 
materials  accounted  for  33.4%  of  our  imports,  while 
partly  or  wholly  manufactured  articles  together 
amounted  to  40.6%.  In  1917  the  figures  were  re- 
versed, manufactures  having  dropped  to  35%   and 


WAR  AXD  FOREIGN-  TRADE 


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190  FOREIGN  TRADE 

raw  materials  having  risen  to  41.7%.  Manufactures 
ready  for  consumption  lost  18.3%;  raw  materials 
gained  75.3%. 

7.  Quantities  and  prices. — So  far  we  have  viewed 
the  development  of  America's  foreign  trade  from  the 
standpoint  of  its  dollar  value  only.  Nothing  has  been 
said  of  the  quantity,  which  is  perhaps  even  more  im-  j 
portant  than  the  increases  and  decreases  of  the  total 
values.  If  the  dollar  were  a  stable  measure  like  the 
yard  stick  it  would  be  easy  to  deduct  the  movements 
of  quantities  from  the  movements  of  values.  But  the 
relation  of  value  to  volume  or  weight  changes  con- 
tinually. We  commonly  say  that  prices  vary,  or,  to 
use  economic  language,  the  purchasing  power  of  ^ 
money  fluctuates.  Therefore  no  discussion  of  trade 
whether  domestic  or  foreign  is  ever  complete  which 
does  not  properly  take  price  changes  into  considera- 
tion in  connection  with  the  totals  of  values  given  for 
trade  movements. 

In  analyzing  foreign  trade  in  wartime  such  a 
process  is  doubly  necessary  as  the  war  brings  with  it 
an  inflation  of  all  values  far  greater  than  peace  times 
ever  witness.  The  advance  of  Bradstreet's  index 
number  during  1917  alone  was  29%  and  the  increase 
over  August  1,  1914,  reached  104%.  That  means 
that  the  purchasing  power  of  the  dollar  at  the  close 
of  1917  was  less  than  half  of  what  it  was  before  the 
war  and  only  one-third  of  the  low-water  mark  year 
of  1896.  The  yearly  average  does  not  show  quite  so 
big  an  advance  but  even  there  we  find  an  advance  of 


WAR  AND  FOREIGN  TRADE  191 

75%  for  1917  over  1914,  the  figures  being  15.6565 
and  8.9034  respectively.  Professor  Pierce,  of  the 
University  of  Iowa,  who  has  made  a  careful  analysis 
of  the  situation  comes  to  the  conclusion  that  the 
growth  of  our  exports  for  the  last  three  years  is  not 
166%  as  the  value  statistics  lead  us  to  believe,  but  less 
than  92%.  Imports,  instead  of  gaining  40%  show  an 
increase  of  but  1.3%  which  gives  a  rise  of  50%,  in 
all  foreign  trade,  and  not  of  110%  as  the  figures 
expressing  growth  in  dollars  indicate.  The  following 
is  a  list  of  export  prices  of  some  principal  domestic 
articles  exported  by  tlie  United  States  for  the  last  four 
years  together  with  the  increase  of  the  1917  price  over 
the  1914  price,  expressed  in  per  cent. 

MONTHLY  AVERAGE  EXPORT  PRICES  OF  PRINCIPAL  DOMESTIC 
ARTICLES  EXPORTED  BY  THE  UNITED  STATES 

(MONTH  OP  MAY) 

Increase  1917 
over  1914 
1914  1915  191fi  1917      ill  per  cent 

Wheat  (bushel)    $0,978  $1.62  $1.28  $     2.58  161.4 

Wheat   flour    (bbl.) 4.69  7.30  5.73  9.52  103.0 

Bituminous  coal  (ton) 2.50  2.63  2.28  3.47  38.8 

Cotton   (pound) 122  .093  .128  .185  51.7 

Bleached  cloths   (yard) 092  .067  .088  .109  18.5 

Colored  cloths    (vard) 067  .066  .088  .118  76.1 

Steel  rails  for  railways  (ton)  .  .    28.85  27.66  32.00  47.40  64.3 

Structural  iron  and  steel  (ten).    38.20  35.28  50.90  72.90  90.9 

Tin  plates    (lb.) 034  .031  .040  .068  100.0 

Wire  (not  barbed)    (lb.) 020  .023  .033  .049  145.0 

Men's   shoes    (pr.) 2.38  2.80  2.73  3.42  43.7 

Women's  shoes  (pr.) 1.70  1.73  1.65  2.31  35.9 

Newsprint  paper  (lb.) 023  .025  .026  .04  73.9 

Wooden      boards,       deals      and 

planks   (M.  ft.) 22.60  23.33  23.84  34.68  53.4 

Wood  pulp    (ton)     43.62*  42.05  48.20  104.67  139.8 

*  July 

A  few  examples  will  further  illustrate  the  impor- 
tant bearing  of  price  movements  upon  the  true  under- 
standing of  trade  development.     Sisal   imports   of 

XV— 14 


192  FOREIGN  TRADE 

1917  valued  at  $25,900,000  as  against  $25,800,000  in 
1916  while  the  quantity  imported  in  1917  was  but 
143,407  tons  against  228,610  in  1916.  Hides  and 
skins  show  a  total  value  in  1917  of  $216,400,000 
against  $158,900,000  in  1916,  while  the  quantity  im- 
ported shows  an  actual  decline  of  43.5  million  pounds. 
The  same  is  true  of  flaxseed,  raw  sugar  and  many 
other  commodities.  Mr.  O.  P.  Austin  in  the  Americas 
(September,  1917)  shows  that  on  25  principal  articles 
imported  for  use  in  manufacturing,  and  which  con- 
stituted 75%  of  all  imports  of  this  class,  the  value 
reported  in  1917,  was  $1,201,595,000,  but  that  if  they 
had  been  valued  at  1914  prices  the  total  would  have 
been  $903,008,000. 

8.  America  enters  the  war. — All  these  trade  cur- 
rents were  more  or  less  vitally  affected  by  America's 
entrance  into  the  war.  This  changed  the  whole  per- 
spective of  American  foreign  trade.  The  trade  with 
the  Allies  has  reached  unheard  of  proportions.  Mili- 
tary importance  is  now  attached  to  it,  and  this  means 
that  sustaining  it  or  even  intensifying  it  is  looked  upon 
as  a  part  of  national  duty,  as  an  act  conducive  to  the 
safety  of  the  republic  and  of  democracy  in  general. 

At  the  same  time  our  attitude  toward  neutrals  had 
to  undergo  a  corresponding  change.  As  the  Chief  of 
the  Bureau  of  Foreign  and  Domestic  Commerce  puts 
it:  "Trade  with  them  must  now  be  conducted  with  a 
careful  and  patriotic  deference  to  the  successful  prose- 
cution of  the  war."  Maintenance  as  well  as  further 
expansion  in  our  newly  won  markets  must  be  made 


WAR  AND   FOREIGN  TRADE  193 

"with  strict  reference"  to  politics  which  govern  all 
foreign  relations,  commercial  and  other.  The  ad- 
vantages of  trade  expansion  are  by  necessity  en- 
dangered as  long  as  the  very  existence  of  the  present 
order  hangs  in  the  balance. 

9.  Government  control  of  trade. — Thus  govern- 
ment regulation  of  exports  and  imports  is  fast  be- 
coming the  most  important  factor  in  the  foreign  trade 
of  this  country.  This  government  control  of  our  for- 
eign trade,  has  recently  been  summarized  as  follows: 


Subject  of  Control 

Office  in  Charge 

1. 

Exports 

War  Trade  Board 

2. 

Imports 

U                   U                        (« 

3. 

Commerce  to  prevent  enemy  trade 

H                  <(                      u 

4. 

Ocean  shipping 

Shipping  Board 

5. 

Communication 

Navy  Department 

6. 

Inland  transportation 

Director  of  Railways 

7. 

Manufacturing  thru  priority 

War  Industry  Board 

The  purpose  of  this  control  is  mainh'^  to  prevent 
goods  manufactured  or  produced  in  the  United  States 
from  reaching  the  enemy  directly  or  indirectly; 
further  the  assurance  of  sufficient  importation  of  in- 
dispensable raw  materials,  the  conservation  of  prod- 
ucts of  the  United  States,  the  supply  of  which  is 
limited,  and  finally  the  most  efficient  "usage  of  ocean 
tonnage. 

Some  of  the  far  reaching  control  which  the  Presi- 
dent exercises  over  our  foreign  trade  was  granted  to 
him  by  the  Espionage  Act  of  July  15th,  a  law  whose 
name  hardly  implies  that  it  gives  the  President  power 
to  prohibit  the  export  of  any  commodity  when  in  his 
judgment  the  public  safetj^  demands  it.    Under  this 


194  FOREIGN  TRADE 

Act  trade  with  the  Scandinavian  countries  and  with 
Holland  and  Switzerland  has  virtually  been  cut  oiF, 
tho  in  the  case  of  Switzerland  special  allowances  have 
been  made.  Furthermore  a  great  many  articles, 
today  numbered  by  the  hundreds,  have  been  put  upon 
selected  lists.  Thus  licenses  are  needed  not  only  for 
all  trading  with  the  European  neutrals  adjacent  to 
Germany,  but  also  for  all  trading  in  certain  commod- 
ities regardless  of  the  destination  of  the  consignment. 
The  embargo  against  the  European  neutrals  has  as  its 
chief  aim  the  complete  shutting  off  of  all  food  ship- 
ments into  Germany.  Realizing  that  it  controls  the 
food  supply  of  the  world,  and,  together  with  Great 
Britain,  the  fuel  supply  also,  the  United  States  feels 
that  it  is  in  the  position  to  enforce  upon  the  neutrals 
any  policy  in  regard  to  trade  with  Germany  which  it 
deems  wise  to  adopt.  So  far  satisfactory  progress  has 
been  made  in  that  direction,  several  of  the  neutrals 
having  submitted  to  a  careful  rationing  of  whatever 
food  supplies  they  are  granted  from  this  side  of  the 
water. 

10.  How  the  exporter  is  affected. — 'We  thus  see 
that  the  life  of  the  American  exporter  toda}^  is  not 
exactly  "a  bed  of  roses."  But  the  full  story  of  his 
cares  has  not  been  told.  The  publication  by  the  War 
Trade  Board  of  the  enemy  trading  list  was  another 
blow  to  an  already  weakened  fighter.  It  somewhat 
remedied  the  confusion  which  had  been  brought  into 
international  trade  by  the  various  blacklists  of  the 
Allies,  but  did  not  remove  restrictions. 

Added  to  all  this  is  the  serious  menace  which  the 


WAR  AND  FOREIGN  TRADE  195 

censorship  brings  to  American  foreign  trade.  Cen- 
sorship is  a  two-edged  sword ;  it  can  do  a  great  deal  of 
good  in  detecting  danger,  but  it  can  likewise  do 
irreparable  damage  by  thro^ving  suspicion  on  the 
innocent,  and  by  paralj'Tiing  initiative. 

It  is  to  be  hoped  that  this  countrj^  will  succeed  to 
the  same  extent  as  Great  Britain  has  done  in  keeping 
alive  its  foreign  trade  relations  and  in  strengthening 
its  position.  The  enormous  financial  burden  wliich  the 
war  is  piling  upon  the  shoulders  of  this  nation  makes  a 
sound  development  of  foreign  trade  still  more  impor- 
tant than  it  had  become  in  the  recent  past.  The  great 
credit  balances  which  the  wonderful  growth  of  our 
export  trade  has  enabled  us  to  pile  up  have  already 
given  us  the  means  with  which  to  pay  our  foreign 
debts  and  to  assume  the  role  of  a  creditor.  They  will 
have  to  continue  if  we  are  to  be  able  to  bear  the 
financial  strain  of  this  war.  Thus  to  economic  con- 
siderations have  been  added  those  of  international 
and  government  financing. 

REVIEW 

What  influences  recently  have  dominated  the  foreign  trade  of 
the  United  States  axid  what  effect  have  they  had  ? 

How  has  the  United  States  offset  its  losses  in  trade  wnth  the 
Central  Powers? 

Why  has  trade  of  the  United  States  with  Canada  expanded 
raore  rapidly  than  with  South  America  ?  Of  what  special  value  is 
South  American  trade  to  the  United  States  ? 

^Vliat  change  has  taken  place  in  tlie  import  trade  of  the  United 
States  and  what  effect  has  it  had  ? 

Discuss  quantities  and  prices  as  applied  to  foreign  trade. 

What  has  been  the  effect  upon  foreign  trade  of  the  Espionage 
Act? 


PART    II 
SHIPPING 


PART  II 

SHIPPING 

CHAPTER  I 

ELEMENTS  OF  OCEAN  TRANSPORTATION 

1.  Freedom  of  the  seas  an  international  law. — The 
ocean  is  a  highway  free  to  all.  Its  vast  extent  allows 
everybody  to  use  as  much  of  it  for  transportation 
service  as  he  wants  without  infringing  upon  the  rights 
of  any  other  person.  This  is  the  fundamental  char- 
acteristic underlying  the  freedom  of  the  seas — the 
condition  under  which  shipping  on  the  high  seas,  in 
time  of  peace  and  time  of  war,  is  carried  on  by  all  the 
nations  of  the  world. 

The  laws  of  nations,  civil  as  well  as  international, 
have  built  many  a  wall  in  defense  of  this  principle. 
Increasing  safety  upon  the  sea,  granted  to  strong  and 
weak  alike,  has  been  one  of  the  proud  records  of 
advancing  civilization.  To  be  sure,  coastwise  ship- 
ping in  many  countries  is  still  reserved  to  the  ships 
of  that  country,  as  in  the  United  States.  But  in 
general,  the  principle  of  equal  treatment  to  all  has 
been  brought  to  a  wider  application  in  ocean  naviga- 
tion than  in   any  other   field   of  human  activities. 

199 


200  SHIPPING 

At  one  time  the  Spanish  were  supreme  upon  the  seas, 
later  the  Dutch.  Today  the  English  claim  that 
supremacy.  The  doctrine  that  one  nation  can  cede 
a  portion  of  the  seas  to  another,  upheld  as  recently  as 
the  eighteenth  century  by  so  eminent  a  man  as  Mon- 
tesquieu, has  become  utterly  irreconcilable  with  the 
views  of  our  jui'ists. 

Thus  the  phrase,  the  freedom  of  the  seas,  has 
almost  the  force  of  an  axiom  in  time  of  peace.  Great 
steps  have  been  taken  toward  extending  the  guar- 
antees of  unmolested  international  trade,  even  into 
the  times  of  war.  The  Declaration  of  I^ondon  of 
1909,  reflecting  as  it  does  the  opinion  of  the  most 
enlightened  men  of  aU  nations  in  the  fields  of  juris- 
prudence and  diplomacy,  was  a  milestone  in  the 
development  of  the  freedom  of  the  sea  in  time  of  war. 
The  fact  that  this  declaration  of  twentieth  century 
sea-rights,  was  never  ratified  detracts  nothing  from 
its  value  as  an  encouraging  omen.  It  marks  a 
tendency  in  the  evolution  of  modern  practice  to  regard 
the  peaceful  rights  of  neutral  nations  as  superior  to 
the  claims  of  a  belligerent  to  treat  commerce  upon  the 
seas  as  it  chooses. 

2.  British  statement  at  the  Hague  conference. — 
This  tendency  is  more  clearly  revealed  in  the  charge 
of  Sir  Edward  Grey  to  the  British  delegates  before 
the  Second  Conference  of  The  Hague,  than  in  any 
other  existing  documents.     This  reads  in  part : 

His  Majesty's  Government  recognize  to  the  full  the  de- 
sirability of  freeing  neutral  commerce  to  the  utmost  extent 


ELEMENTS  OF  OCEAN  SHIPPING  201 

possible  from  interference  by  belligerent  powers,  and  they 
arc  ready  and  willing,  for  their  part,  in  lieu  of  endeavoring 
to  frame  new  and  more  satisfactory  rules  for  the  prevention 
of  contraband  trade  in  the  future,  to  advance  in  the  prin- 
ciple of  contraband  of  war  altogether,  thus  allowing  the  over- 
sea trade  in  neutral  vessels  between  belligerents  on  the  one 
hand  and  neutrals  on  the  other  to  continue  during  war  with- 
out any  restrictions,  subject  only  to  exclusion  by  blockade 
from  an  enemy's  port.  They  are  convinced  that  not  only 
the  interest  of  Great  Britain,  but  the  common  interest  of 
all  nations  will  be  found,  on  an  unbiased  examination  of  the 
subject,  to  be  served  by  the  adoption  of  the  course  sug- 
gested. 

In  the  event  of  the  proposal  not  being  favorably  received, 
an  endeavor  should  be  made  to  frame  a  list  of  the  articles 
that  are  to  be  regarded  as  contraband.  Your  efforts  should 
then  be  directed  to  restricting  that  definition  within  the  nar- 
rowest possible  limits  and  upon  lines  which  have  the  point  of 
practical  extinction  as  their  ultimate  aim. 

If  a  definite  list  of  contrabands  cannot  be  secured,  you 
should  support  and,  if  necessary,  propose  regulations  in- 
tended to  insure  that  nations  shall  publish,  during  peace,  the 
list  of  articles  they  will  regard  as  contraband  during  war, 
and  that  no  change  shall  be  made  in  the  list  at  the  outbreak 
of  or  during  hostilities. 

A  list  might  be  prepared  and  submitted  for  adoption  by 
the  conference,  specifying  the  articles  which  in  no  event  shall 
fall  within  the  enumeration  of  contraband ;  that  is,  mails, 
foodstuflTs  destined  for  places  other  than  beleaguered  fort- 
resses and  any  raw  materials  required  for  the  purposes  of 
peaceful  industr}^  It  is  essential  to  the  interest  of  Great 
Britain  that  every  effective  measure  necessary  to  protect  the 
importation  of  food  supplies  and  raw  materials  for  peaceful 
industries  should  be  accompanied  by  all  the  sanctions  which 
the  law  of  nations  can  supply. 

His  Majesty  would  further  be  glad  to  see  the  right  of 
search  limited  in  every  practicable  way,  e.g.,  by  the  adoption 
of  a  system  of  consular  certificates  declaring  the  absence  of 


202  SHIPPING 

contraband  from  the  cargo  and  by  the  exemption  of  passen- 
ger and  mail  steamers  upon  defined  routes,  etc. 

3.  Interest  of  the  United  States. — All  thru  the  dip- 
lomatic history  of  the  nineteenth  century,  the  United 
States  has  stood  for  the  principle  of  the  immunity  of 
private  property  at  sea  in  wartime.  The  interference 
of  the  European  war  with  our  exports  not  only  to 
Germany,  but  to  the  neutral  countries  of  Europe, 
gave  us  grave  cause  to  be  anxious  lest  over-sea  nations 
attempt  to  restrict  their  dej^endence  upon  necessary 
supplies  from  the  United  States.  Such  a  tendency 
would  be  a  backward  step  in  the  progress  of  civil- 
ization and  would  be  a  severe  blow  to  that  expansion 
of  our  export  trade  for  which  we  most  earnestly 
strive. 

4.  Freedom  of  the  seas  and  economic  law. — The 
freedom  of  the  seas  is  not  only  a  political  issue  and  a 
principle  of  international  law,  but  it  is  also  an  econo- 
mic concept,  fundamental  to  the  understanding  of 
ocean  shipping.  The  same  abundance  which  renders 
it  impracticable  for  one  nation  to  appropriate  all  or 
even  parts  of  the  sea  to  its  exclusive  possession,  also 
guarantees  a  greater  freedom  to  the  individual  sea- 
farer than  prevails  in  any  other  field  of  business.  In 
contrast  to  land  transportation,  water  transportation 
is  surprisingly  free. 

This  is  strikingly  illustrated  by  an  article,  "Agree- 
ments and  Conferences  in  Their  Relation  to  Ocean 
Rates,"  written  by  Mr.  William  Boyd,  President  of 
Houlder,  Weir  and  Boyd,  Incorporated.     He  points 


ELEMENTS  OF  OCEAN  SHIPPING  203 

out  the  principal  difference  existing  between  rail  and 
water  transportation : 

Railroads  obtain  their  franchise  from  the  state,  which 
permits  them  to  lay  their  tracks  along  the  lines  of  existing 
or  potential  trade  centers,  and  to  acquire  rights  of  way  by 
the  exercise  of  eminent  domain.  Without  these  privileges, 
a  railroad  cannot  be  built.  A  road  which  is  built  in  the  ex- 
ercise of  such  a  franchise  becomes  in  duty  bound  to  maintain 
a  regular,  continuous  service,  as  efficient  as  the  needs  of  the 
trade  along  the  line  require  and  the  rewards  of  the  business 
will  permit.  It  is  but  just  that  companies  thus  organized, 
enjoying  property  rights  acquired  often  at  the  expense  of 
the  state,  and  operating  by  virtue  of  special  privileges,  should 
be  held  to  the  performance  of  functions  for  which  they  were 
created,  and  should  not  so  use  their  privileges  as  to  cause 
prejudice  to  the  public.  They  are  public  utilities  and  must 
expect  public  regulation. 

The  conditions  under  which  transportation  by  sea  is  con- 
ducted are  totally  different.  The  ocean  trade,  except  for 
restricted  coastwise  trades  in  some  countries,  is  free  to  all 
comers.  Ships  are  not  fixtures  and  are  not  constrained  to 
any  fixed  line  or  route.  They  owe  no  duty  to  the  state  to 
maintain  a  service  or  to  serve  the  public.  Their  enterprises 
are  of  a  private  nature.  They  may  come  and  go  by  what- 
ever route  or  in  whatever  direction  they  please.  Their  only 
incentive  to  engage  in  any  particular  trade  is  to  develop  such 
trade  to  such  a  point  that  it  will  yield  a  profit  which  will 
justify  regular  and  continuous  service. 

5.  Reaso7is  for  difference  hetween  land  and  tcater 
transportation. — This  basic  difference  between  trans- 
portation by  land  and  by  water  lies  in  the  fact  that  in 
the  case  of  the  former  the  roadway  has  to  be  prepared 
or  even  created  by  the  expenditure  of  huge  sums. 
The  ocean,  on  the  contrary,  requires  no  such  invest- 


204.  SHIPPING 

ment  in  order  to  become  suitable  for  the  purposes  of 
transportation.  It  is  there,  ready  to  carry  all  the 
vessels  that  are  willing  to  intrust  themselves  to  it.  A 
man  who  wishes  to  send  a  cargo  of  wheat  from  New 
York  to  Liverpool  merely  charters  a  vessel  or  engages 
berth  space  on  a  liner.  But  before  the  wheat  can 
travel  from  Chicago  to  New  York,  years  of  labor  must 
have  been  spent,  and  millions  of  dollars  must  have 
been  invested  in  constructing  a  railroad. 

This  difference  in  the  capital  outlay  necessary  for 
an  effective  entrance  in  the  transportation  business 
on  land  or  water  means  two  things.  The  capital 
needed  to  construct  the  railroad  with  all  its  termini, 
branch  lines,  equipment  and  stations,  would  not  be 
invested  without  the  protection  granted  by  the 
franchise.  This  franchise,  however,  means  a  serious 
limitation  on  the  freedom  of  operation  on  the  part 
of  the  railroad.  The  second  result  of  the  high  cost 
of  constructing  a  railroad  is  the  quasi-monopoly 
resulting  from  the  high  cost  of  redupHcation  which 
keeps  outsiders  out.  No  franchise  is  needed  to  sail 
the  seas,  and  the  possibility  of  outsiders  entering  the 
field  of  any  existing  steamship  line  is  almost 
unlimited.  That  is  the  economic  meaning  of  the 
freedom  of  the  sea. 

6.  Guarantees  of  the  freedom  of  the  sea. — A  con- 
trary view  to  that  just  stated  seems  to  be  expressed 
in  the  following  paragraph  of  the  majority  report  of 
the  Special  Committee  on  the  Merchant  Marine  of  the 
Chamber  of  Commerce  of  the  United  States,  in  1914: 


ELEMENTS  OF  OCEAN  SHIPPING  205 

The  ocean  lanes  are  no  longer  free,  trade  routes  being  laid 
out  with  as  much  precision  as  our  great  railroad  trunk  lines, 
and  traversed  with  almost  the  same  regularity.  The  line  or 
lines  operating  are  as  jealous  of  their  field  of  influence  and 
resent  intruders  with  as  much  spirit  as  do  our  corporations 
controlling  inland  means  of  communication.  Hundreds  of 
agreements  exist  for  protection  and  to  exclude  the  new- 
comers, profits  or  losses  are  pooled,  the  number  of  yearly 
sailings  by  each  line  is  apportioned  and  ports  of  discharge 
assigned. 

The  facts  enumerated  in  this  statement  are  all  true, 
but  it  is  difficult  to  concur  in  its  conclusions.  Liners 
form  but  a  fraction  of  the  world's  shipping,  whose 
major  part  consists  of  the  uncontrollable  elements 
known  as  tramps.  Their  mere  existence  is  a  guaran- 
tee assuring  the  shipper  against  the  abolition  of  the 
much  cherished  freedom  of  the  sea. 

Equally  important  with  a  thoro  understanding  of 
these  distinctions  between  sea  and  land  transporta- 
tion, is  an  exact  knowledge  of  the  common  terms  of 
ocean  shipping.  Ocean  tonnage  is  the  most  impor- 
tant of  these  terms  and,  therefore,  should  be  the  first 
to  be  explained. 

7.  Tonnage  definitions  and  tonnage  ratios. — In 
maritime  language  there  are  two  kinds  of  tons — 
vessel  tons  and  cargo  tons. 

There  are  three  general  methods  of  measuring  a 
ship  and  four  terms  given  to  the  tonnage  ascertained. 
The  methods  are : 

1.  By  displacement  tonnage,  expressed  in  displace- 
ment tons 


^06  SHIPPING 

2.  By  dead  weight  tonnage,  expressed  in  dead 
weight  tons 

3.  By  registered  tonnage,  expressed  as  gross  tons 
and  as  net  tons. 

The  displacement  tonnage  of  a  vessel  gives  the 
weight  of  the  volume  of  water  displaced  by  the  ship 
when  fully  loaded  or  "down  to  her  marks."  The  use 
of  the  term  "displacement  tons"  is,  in  general,  applied 
to  the  war  vessels  of  various  nations  of  the  world. 
These  vessels  carry  no  cargo  and  since  the  other 
methods  of  measuring  have  a  special  bearing  on  cargo 
and  passenger  boats,  it  is  fitting  that  the  method  of 
measuring  by  displacement  tons  should  be  applied  to 
the  vessels  of  war.  They  carry  neither  cargo  nor 
passengers. 

Dead- weight  tons  are  the  weight  tons  (2240  pounds 
in  the  United  States,  Canada  and  England;  2204 
pounds  in  other  European  countries)  of  fuel,  cargo, 
passengers,  etc.,  which  a  vessel  can  carry.  It  is  the 
vessel's  dead-weight  capability,  its  carrying  power. 
It  is  evident  that  this  measure  cannot  be  employed  as 
the  universal  basis  on  which  the  tolls  and  expenses  at 
various  ports  should  be  levied,  since  the  amount  of 
weight  a  large  passenger  vessel  could  carry,  would  not 
be  at  all  commensurate  with  her  size.  In  short,  dis- 
placement tonnage  includes  the  weight  of  a  ship  and 
all  on  board ;  dead-weight  tonnage,  the  weight  of  the 
cargo  which  the  vessel  can  carry. 

8.  First  proposals  of  a  uniform  method  of  measur- 
ing vessels. — In  the  earlier  days  of  commerce,  con- 


ELEMENTS  OF  OCEAN  SHIPPING  207 

tinual  friction  occurred  on  account  of  the  lack  of  an 
adequate  method  of  measuring  vessels,  a  measure 
which  would  cover  the  requirements  of  all  commercial 
vessels  and,  at  the  same  time,  be  uniform  thruout  the 
world.  Such  a  method  was  first  proposed  in  1837  by 
M.  M.  Martin,  secretary  of  the  Department  of  Public 
Works,  Agriculture  and  Commerce  of  France.  The 
system  at  present  in  force  thruout  the  world,  the 
Moorsom,  was  adopted  by  the  United  States  in  1864. 
It  was  a  method  devised  by  an  EngHshman  of  that 
name.  This  system,  altho  employing  the  term  "tons" 
does  not  imply  thereby  the  accepted  meaning  of  the 
word,  namely,  weight.  It  means  units  of  100  cubic 
feet  each.  It  is  used  to  determine  the  space  within  a 
merchant  vessel,  in  units  of  100  cubic  feet  called 
"registered  tons,"  which  it  contains. 

9.  Moorsom  system, — The  tonnage  deck  of  a  vessel, 
having  three  or  more  decks,  is  the  second  deck  from 
below.  On  a  vessel  with  one  or  two  decks,  the  upper 
deck  is  the  tonnage  deck.  The  length,  depth  and 
breadth  of  the  space  under  the  tonnage  deck  are 
measured,  and  the  product  of  these  dimensions  gives 
the  cubical  contents.  In  a  similar  manner,  the  cubical 
contents  of  the  decks  above  the  tonnage  deck  are 
ascertained,  and  the  sum  of  these  products  gives  the 
cubical  contents  of  the  hull  of  the  ship.  On  the  upper 
deck  are  various  appurtenances  and  inclosures.  The 
cubical  contents  of  these  inclosures — namely,  the  fore- 
castle, chart-house,  round-houses,  excess  hatchways, 
bridge  and  poop — are  determined  and  added  to  the 

XV— 15 


208  SHIPPING 

former  total,  and  this  result  is  the  gi'oss  registered  ton- 
nage of  the  vessel.  The  rules  concerning  the  spaces 
that  shall  be  included  in  gross  tonnage  vary  with  dif- 
ferent countries.  Thus  a  ship  would  not  have  the 
same  gross  tonnage  under  the  rules  of  Great  Britain 
as  under  those  of  the  United  States. 

Not  all  the  cubical  capacit}^  of  a  ship  is  available 
for  passengers  and  cargo.  Crews'  quarters,  masters' 
quarters,  officers'  quarters,  chart-room  and  stores  have 
no  earning  power.  To  ascertain  the  net  tonnage,  the 
cubical  contents  of  these  inclosures  and  quarters  must 
be  deducted  from  the  gross  tonnage.  Were  the  gross 
tonnage  the  only  tonnage,  and  the  tonnage  on  which 
all  taxes,  port  charges,  canal  tolls,  etc.,  were  levied, 
there  would  be  an  unfortunate  tendency  on  the  part 
of  owners  to  make  the  crew  quarters  as  small  as  possi- 
ble. Therefore,  nearly  all  great  maritime  nations 
provide  that  taxes,  with  due  exceptions,  shall  not  be 
collected  on  the  gross  tonnage.  In  sailing  vessels,  the 
non-earning  capacit}^  which  corresponds  to  the  engine 
room  and  bunkers  are  the  lockers  where  the  sails  are 
stored. 

Generally  speaking,  the  net  register  tonnage  is 
somewhat  less  than  two-thirds  of  the  gross  register,  in 
the  case  of  an  up-to-date  freight  steamer.  In  the  case 
of  the  high-speed  passenger  vessels,  the  net  register 
tonnage  may  be  less  than  half,  sometimes  not  more 
than  one-third  of  the  gross  register.  It  may  be  given 
as  a  rough  rule  that  the  dead-weight  capacity  of  a 


ELEMENTS  OF  OCEAN  SHIPPING  209 

vessel  is  from  234  to  2%  times  the  net  register 
tonnage. 

10.  Freight  charges  and  kinds  of  tons. — The  appli- 
cation of  these  kinds  of  tons  to  the  actual  business  of 
shipping  must  be  considered.  The  cargo  ton  is  of  two 
classes:  weight  and  measurement.  In  ocean  com- 
merce, the  metric  system  of  weight  measure,  which  in- 
cludes the  meti'ic  ton  of  2,204.68  pounds,  is  more  gen- 
erally used  than  the  English  system  with  its  long-ton 
of  2,240  pounds,  which  also  prevails  in  the  United 
States  and  Canada.  In  American  railroad  traffic  and 
on  inland  waterways  the  short-ton  of  2,000  pounds  is 
used  almost  exclusively. 

If  a  shipment  "measures  more  than  it  weighs," 
that  is,  if  its  weight  is  less  than  56  pounds  to  the  cubic 
foot,  the  freight  will  be  based  upon  the  measurement 
ton,  which  is  equal  to  40  cubic  feet.  The  figure  5Q  is 
ascertained  by  dividing  2,240 — number  of  pounds  in 
long  ton — by  40 — the  number  of  cubic  feet  in  meas- 
urement ton.  The  steamship  company  charges  by 
weight  or  measurement,  whichever  way  it  gets  the 
larger  revenue.  Grain,  minerals  and  some  other  sim- 
ilar products  move  regularly  by  weight;  but  manufac- 
tures, general  merchandise,  and,  in  fact,  most  kinds  of 
ocean  freight  are  taken  at  "ship's  option,"  weight  or 
measurement.  The  option  which  is  taken  is  ordi- 
narily measurement,  since  comparatively  few  com- 
modities weigh  more  than  they  measure.  The  reason 
wh^'^  the  measurement  ton  has  tlie  size  of  fort}'^  cubic 


210  SHIPPING 

feet  is  due  simply  to  the  fact  that  a  weight  ton  of  Rus- 
sian wheat  occupies  forty  cubic  feet.  This  explana- 
tion seems  plausible  when  we  consider  that  wheat  has 
long  been  the  greatest  staple  of  ocean  commerce  and 
that  Russia  represents  its  chief  source. 

11.  Computing  net  tonnage  from  gross  tonnage. — 
It  has  been  remarked  that  there  are  different  methods 
of  computing  net  tonnage  from  gross  tonnage.  The 
fact  that  the  American  method  of  measuring  tonnage 
results  in  a  considerably  higher  ratio  of  net  to  gross, 
than  under  the  British  method,  is  often  cited  as  one  of 
the  obstacles  to  the  building  up  of  an  American  mer- 
chant marine.  Port  charges,  tonnage  dues  and  any 
other  charges  such  as  canal  tolls  are  levied  upon  net 
register  tonnage.  For  example,  Captain  Robert  Dol- 
lar in  the  Pacific  Marine  Review  of  August,  1913, 
complained  that  his  steamer  Hazel  Dollar  measures 
2,800  net  tons  by  British  measurement  and  3,582  by 
American,  which  amounted  to  779  net  tons  more  than 
tlie  British  registry  would  give  him.  Much  of  the 
force  of  this  argument  is  lost,  however,  when  it  is  re- 
called that  most  American  vessels  in  the  foreign  trade 
possess  the  necessary  papers  to  show  their  registered 
tonnage  according  to  both  British  and  American 
measurements  so  that  they  can  avail  themselves  of 
either,  as  convenience  demands. 

Also  in  regard  to  dead-weight  capacity,  superiority 
over  the  American  regulations  is  claimed  for  the 
British  rules.    All  British  steamers  ^  have  a  load  line 

1  This  applies  also  to  Canadian  vessels. 


ELEMENTS  OF  OCEAN  SHIPPING  211 

painted  on  the  outside  of  the  ship  to  indicate  the  depth 
to  which  the  ship  may  be  loaded  without  possible 
danger  to  life  and  property.  This  is  known  as  the 
Plimsoll  line.  The  scale  of  feet  pamted  on  an  Amer- 
ican vessel  does  not  offer  the  same  guarantee.  As 
more  vessels  engage  in  oversea  trade,  the  desirability 
of  this  Plimsoll  line  will  probably  be  more  generally 
realized. 

12.  Cargo  space  and  dead-weight  capacity. — In 
order  to  use  the  cargo  space  of  a  vessel  to  the  greatest 
possible  advantage,  discrimination  is  called  for  in  the 
mixing  and  stowing  of  measurements  and  weight 
cargo.  There  are  few  commodities  which,  when  used 
alone,  assure  an  economical  loading  of  the  ship. 
WHieat  comes  as  close  to  the  ideal  as  almost  any  other 
commodity.  In  the  case  of  pig  iron,  the  dead-weight 
capacity  of  the  ship  will  be  reached  v/hen  four-tenths 
of  the  cargo  space  is  still  empty.  On  the  other  hand, 
a  cargo  of  cotton  will  completely  fill  the  available 
space  without  utilizing  the  ship's  dead-weight  ca- 
pacity. We  find  that  even  in  the  case  of  a  steamer 
which  takes  lumber  across  the  ocean,  careful  selec- 
tion of  various  classes  of  wood  is  made  in  order  to 
assure  the  most  profitable  and  complete  loading  of  the 
vessel.  Frequently  cotton  is  added  to  fill  space,  and 
a  deck-load  of  timber  or  logs  is  used  to  complete  the 
cargo.  In  the  chapter  on  freight  rates,  we  shall  ex- 
plain how  liners,  by  means  of  their  freight  rate  policy, 
influence  the  type  of  cargo  that  is  forwarded  to  them 
for  shipment. 


212  SHIPPING 

13.  Ship  inspection  and  registration, — All  ships 
flying  the  American  flag  are  listed  by  the  United 
States  government.^  Their  machinery,  life-boats, 
boiler  and  the  whole  equipment  are  inspected  an- 
nually by  an  inspector  connected  with  the  Bureau  of 
Navigation  of  the  Department  of  Commerce.  In  ad- 
dition to  this  government  inspection,  plans  and  speci- 
fications prepared  for  the  construction  of  vessels  are 
passed  and  and  approved  by  private  institutions  whose 
main  business  is  marine  insurance ;  such  as  the  famous 
Lloyds,  Bureau  Veritas  and  the  American  Bureau  of 
Shipping.  They  also  watch  every  step  in  building, 
and  test  the  materials  used.  On  the  basis  of  these 
observations,  the  vessel  is  rated.  This  rating  forms 
the  basis  upon  which  insurance  companies  accept  and 
assess  risks  on  hulls.  When  all  conditions  imposed 
upon  ship-builders  and  ship-owners  are  complied  with, 
our  government  "registers"  the  vessel  if  it  is  to  engage 
in  foreign  trade.  Vessels  emj)loyed  in  coastwise  and 
inland  trade  are  "enrolled."  The  certificate  of  regis- 
tration is  to  a  vessel  what  citizen  papers  are  to  the  indi- 
vidual. They  entitle  the  ship  to  the  protection  of  the 
government  whose  flag  it  flies  and  to  the  enjoyment  of 
all  the  privileges  guaranteed  by  international  law  or 
special  treaties.  In  case  of  war  or  international  com- 
plications, the  vessel  often  procures  a  passport  or  "sea- 
letter." 

Numerous  documents  called  ship  papers  must  be 

^  Similar  provisions  for  the  inspection  and  registration  of  vessel.s  de- 
sirous of  being  entered  on  the  Canadian  registry  are  enumerated  in 
detail  in  the  Canada  Shipping  Act. 


ELEMENTS  OF  OCEAN  SHIPPING 


213 


TBUnJBT  I 

IT.  B.  PVBue  BxAiTB  BCEnc«, 
Fon&  1S«4. 


# 


t^ 


,^\^^^ 


STSTES  Of 


^4J 


% 


e 


< 


PORT  SANITARY  STATEMENT. 

U.  S,  PUBLtC'HEALTH  SERVICE. 


PoH  of^ 


Vessel: . 

Bound  from to 

J^umber  of  eases  of  and  deaths  from  the  foUowin^-nam,ed  diseases  reported  during  the 
two  weeks  ending-.^ : ,  191 


DISEASES. 

KiniEER  op 

,  KOTIBEB  OF 
DEATHS. 

RElCARSa. 
CAny  ooDditioa  affecttoe  th*  public  ha^th  «ilsUng  tn  tbs  port  lo  b*  ' 
fl»^^rf^ar.^^l^>ri^ld^ngnJ^>^»lil>n*^nfnl^^alt^^Mnl^u^llaIlmd^«t^r^ 
mlDAtlon.) 

Cholera,  Asiatic i, 



SearletFever 

TS[T)hoid  Fever 

Typhus  Feyer „ 

Yellow  Fever 

Vessel  last  fumigated  at . 


Given  under  my  hand  and  teal  thit. 


■  ^ay  of.. 


-,19 


Sarjeon,  V.  S.  Puilic  BeaUh  Service. 


executed  before  a  ship  may  enter  or  clear  from  a  port. 
For  example,  no  vessel  from  a  foreign  port  can  enter 
a  port  of  the  United  States  without  a  clean  bill  of 


214  SHIPPING 


\  DcrAJITMCNT  Of  COMHCACC 


CLEARANCE  OF  VESSEL'TO  A  FOREIGN  PORT 


(SecCloa  ISOI,  BavUed  SCMaC«w 


DISTRICT  OF  NEW  YORKl 

PORT  OF  NEW  YORK  '' 


['Shcsc  arc  ta  certifg  bU  totiom  it  datb^conccniT, 
'THAT 


;  Master  or  Commander  of  the 

'burden Tons,  or  thereabouts,  mounted  with. 

;  Guns,  navigated  with lifen.  — 

built  and  bound  for 


having  on  board . 


meirchandise:  and  stores. 

^hath  here  entered  and  cleared  his  said  vessel,  according  to  taw. 

.  6IVEH  under  our  hands  and  seals,  at  the  Cusfom-House  of  the  Port  of  New  Torlt.  this . 

day  e/_ one  thousand  nine  hundred  and . 

and  in  the year  of  the  Independence  of  the  United  Stales  of  America. 


Daptily  Kmal  OlJictr. 


ELEMENTS  OF  OCEAN  SHIPPING  215 

health.  If  a  steamer  is  to  leave  Hongkong  for  San 
Francisco  it  must,  before  departure,  secirre  from  the 
American  Consul  at  Hongkong  a  document  which 
states  that  the  vessel  is  free  from  contagious  diseases. 
If  a  contagious  case  is  known  of  in  the  port  of 
departure,  that  fact  is  noted  on  the  bill  of  health. 
When  the  vessel  enters  San  Francisco,  this  paper  is 
given  to  the  quarantine  officers,  who  are  the  first  to 
board  the  ship  upon  its  arrival.  Only  after  the  most 
careful  scrutiny  of  this  paper,  and  a  thoro  examina- 
tion of  passengers  and  crew,  is  the  vessel  granted 
entry.  Permission  to  enter  is  outwardly  indicated  by 
lowering  the  yellow  flag  which  is  flown  from  the  fere- 
mast  while  the  ship  is  passing  inspection. 

When  a  vessel  leaves  the  United  States  or  Canada 
for  a  foreign  port  it  must  take  a  "port  sanitary  state- 
ment"; a  revised  form  of  the  bill  of  health.  It  must 
also  be  provided  with  clearance  papers.  In  the  latter 
the  language  gives  evidence  that  the  form  was  pre- 
pared many  years  ago.  Illustrations  of  these  docu- 
ments are  given  on  pages  213  and  214. 

14.  Regulations  governing  the  manifest. — The 
next  authority  to  be  satisfied  by  the  entering  vessel 
are  the  officials  of  the  Customs  House  service.  They 
inspect  the  list  of  passengers  and  the  list  of  stores. 
The  list  of  passengers  serves  in  the  preparation  of 
statistics,  showing  the  emigration  and  immigration, 
and  in  a  minor  way  for  the  purpose  of  detecting  crim- 
inals and  undesirable  aliens.     Tlie  list  of  stores  is 


J216  SHIPPING 

intended  to  separate  the  cargo  from  the  provisions 
left  after  the  voyage.  The  most  important  document 
is  the  manifest.  This  is  a  declaration  of  the  entire 
cargo,  a  summary  of  all  the  bills  of  lading. 

REVIEW 

What  is  the  significance  of  the  phrase  "freedom  of  the  seas" 
in  international  law^  and  wliat  is  its  economic  interpretation  ? 

What  are  the  fundamental  differences  between  land  and  water 
transportation  ? 

State  the  different  meanings  of  the  word  tonnage. 

How  is  net  tonnage  distinguished  from  gross  tonnage  ? 

How  is  freight  charged?  State  the  rule  for  using  the  weight 
ton  or  measurement  ton. 

Why  are  mixed  cargoes  desirable? 

Describe  a  bill  of  health. 


CHAPTER  II 

OCEAN  CARRIERS 

1.  Ship  development. — On  land  the  railroad  repre- 
sents the  unit  of  transportation,  on  the  ocean  it  is  the 
ship.  Just  as  the  raih'oad  equipment,  particularly  the 
locomotive,  during  the  last  century  passed  thru  vari- 
ous stages  of  a  remarkable  development,  the  ocean 
carrier  underwent  many  changes.  The  ship  of  today 
is  sixty  times  bigger  and  many  times  faster  than  it;s 
prototype  of  George  Washington's  time.  On  the 
even  basis  of  ton  for  ton,  the  shipping  of  the  present 
is  five  or  six  times  as  efficient  as  that  in  the  early  days 
of  this  nation.  This  is  the  result  of  the  substitution  of 
steam  and  oil  for  sails  as  motive  power,  and  of  iron 
and  steel  for  wood  as  material  of  construction. 
When  we  compare  the  leviathans  of  today,  with  their 
gross  register  tonnage  of  50,000  tons,  with  the  400  ton 
ships  that  were  the  pride  of  Salem  a  century  ago,  we 
must  indeed  marvel  at  the  progress  of  mankind  upon 
the  sea. 

From  the  viewpoint  of  engineering,  the  size  of  the 
vessel  is  limited  only  by  the  depth  of  the  channel 
traversed  and  the  draft  permissible  at  the  termini,  not 
by  difficulties  inherent  in  the  construction  of  the  vessel 
or  its  operation.     The  Suez  Canal,  because  of  its  hm- 

217 


218  SHIPPING 

ited  dimensions  does  not  allow  the  passage  of  any  ship 
of  more  than  8.53  meters  draft,  22.86  meters  width 
and  170.86  meters  length,  thereby  restricting  the  en- 
tire tonnage  available  for  the  trade  with  the  Orient  to 
a  maximum  which  begins  to  prove  burdensome.  The 
time  will  come  when  the  Panama  Canal  also,  in  spite 
of  the  gigantic  dimensions  of  its  lock  constructions, 
will  be  a  check  upon  the  natural  development  of  ship- 
building in  regard  to  the  size  of  vessels  using  it.  It 
will  be  recalled  with  what  difficulty  New  York 
obtained  from  the  War  Department  permission  to 
extend  its  pier  head  lines  in  order  to  care  for  the  Olym- 
pic and  Imperator. 

2.  Causes  of  growth. — The  enlargement  of  ships 
was  rendered  profitable  by  the  vast  increase  in  the  vol- 
ume of  trade  during  the  last  century.  The  growth  was 
stimulated  by  the  keen  competition  existing  among 
rival  steamship  lines,  which  only  in  recent  years  came 
to  satisfactory  agreements  with  each  other.  The 
growth  was  made  possible  by  the  development  in  the 
art  of  ship-building,  particularly  with  regard  to  the 
marine  engine.  The  increase  since  1840  in  the 
effective  power  obtained  by  marine  engines  from  the 
combustion  of  coal  is  shown  in  the  following  table: 

In  1840,  1  lb.  coal  propelled  0.578  displaced  tons  at    8  knots 

In  1850,  1  lb  coal  propelled  0.6  displaced  tons  at    9  knots 

In  1860,  1  lb.  coal  propelled  0.82  displaced  tons  at  10  knots 

In  1870,  1  lb.  coal  propelled  1.8  displaced  tons  at  10  knots 

In  1880,  1  lb.  coal  propelled  2.1  displaced  tons  at  10  knots 

In  1890,  1  lb.  coal  propelled  3.33  displaced  tons  at  10  knots 

In  1898,  1  lb.  coal  propelled  3.5  displaced  tons  at  10  knots 

This   greater   efficiency   is   due   primarily   to   the 


OCEAN  CARRIERS  219 

development  of  the  compound  engine  and  the  steam 
turbine,  which  have  multiplied  the  energy  obtained 
from  a  pound  of  coal.  Moreover,  the  earning  weight 
of  the  displacement  ton  has  considerably  increased  as 
a  result  of  more  efficient  construction  methods.  Thus 
the  .578  displaced  tons,  given  in  the  preceding  table  for 
1840,  represented  an  earning  weight  of  but  .057,  while 
the  3.5  displaced  tons  of  1898  correspond  to  a  weight 
efficiency  of  2.1.  Today  Ko  of  a  ton  of  coal  will  bring 
a  ton  of  cargo  5,000  miles. 

3.  Steam  and  sail  tonnage. — Less  than  a  century 
ago,  the  steam  vessel  was  a  dream  of  enthusiasts;  to- 
day the  steam  tonnage  represents  93  per  cent  of  the 
total  gross  register  tonnage  of  the  world.  During  the 
25  years  ending  July  1,  1915,  the  total  tonnage  of  the 
world's  merchant  marine  showed  an  increase  of  122.7 
per  cent  while  the  total  steam  tonnage  during  the 
same  period  increased  252.2  per  cent.  If  the  carrying 
service  of  the  steam  tonnage  could  be  measured,  it 
would  show  an  even  gi-eater  preponderance  over  the 
sailing  tonnage  because  of  the  greater  carrying 
efficiency  of  the  steamer,  due  to  its  ability  to  make 
faster  and  more  frequent  trips. 

As  late  as  1890,  sailing  vessels  had  the  upper  hand 
over  steamers  in  tonnage;  and  as  late  as  1896,  in 
numbers.^  Shipping  under  the  American  flag  con- 
tains a  larger  proportion  of  sail-tonnage  than  is  the 
case  of  the  merchant  fleets  of  most  countries.     This 

1  On  December  31,  191;';,  there  were  on  the  Canadian  registry  4,6;?.'> 
sailing  vessels  with  a  gross  tonnage  of  491,228,  as  compared  with  4,132 
steam  vessels  aggregating  753,745  tons. 


'2W  SHIPPING 

is  due  to  the  fact  that  the  American  coastwise  trade 
is  restricted  by  law  to  American  vessels  only.  The 
elimination  of  competition  is  responsible  for  the  fact 
that  an  obsolete  type  of  vessel,  which  in  other  fields 
of  ocean  shipping  could  not  withstand  the  modern 
steamer,  could  hold  on  to  a  certain  portion  of  its 
former  exclusive  domain.  In  the  United  States,  also, 
the  sailing  vessel  is  losing  ground,  the  total  steam  ton- 
nage having  grown  from  1,859,088  tons  in  1890  to 
4,854,748  in  1915;  an  increase  about  five  times  as 
rapid  as  that  of  the  total  tonnage  of  the  United  States' 
merchant  marine. 

The  coasting  trade  of  Canada  is  open  to  any  British 
ship,  or  to  the  ships  of  any  foreign  state  given  such 
rights  by  a  British  treaty.  A  foreign-built  British 
ship  must  take  out  a  license  and  pay  a  duty  of  25 
per  cent  on  her  market  value  before  engaging  in  tlie 
coasting  trade  of  Canada.  Finally,  the  Governor  in 
Council  may  open  Canada's  coasting  trade  to  the 
ships  of  any  foreign  country  which  grants  Canadian 
ships  similar  privileges. 

The  sailing  ship  possesses  advantages  in  its  free 
motive  power  and  its  relatively  small  crew  require- 
ments. But  these  are  more  than  offset  by  slow  speed 
and  uncertainty  as  to  the  time  of  delivery  of  the  cargo. 
These  two  qualities  of  speed  and  regularity  have 
become  more  and  more  important.  The  interna- 
tional exchange  of  goods  is  based  on  contracts  made 
before  the  departure  of  the  vessel.  It  is  estimated 
that  the  steamer  possesses  four  times  the  sailing  ship's 


OCEAN  CARRIERS  221 

efficiency  as  a  cargo  carrier,  altho  /4  to  Vs  of  the 
steamer's  hull  capacity  is  occupied  by  bunkers  and 
machinery.  Turbines,  compound  engines,  slender 
speed  lines  made  possible  by  the  use  of  steel  in  con- 
struction— all  these  have  meant  regularity,  speed, 
more  voyages  per  year. 

4.  Oil-burning  vessels. — The  latest  phase  in  the 
development  of  the  steamer  is  marked  by  the  introduc- 
tion of  the  Diesel  engine.  The  oil-burning  vessel  will 
probably  play  an  important  part  in  the  future  history 
of  shipbuilding  and  shipping.  There  is  a  threefold 
saving  incident  to  this  type  of  propulsion.  There  is 
a  reduction  in  cost  of  wages  because  of  reduced  boiler- 
room  requirements  and  consequently  a  smaller  crew. 
An  offset  to  this  item  lies  in  the  higher  initial  cost  of 
the  ship,  higher  insurance  rates  and  greater  cost  of 
repairs.  But  the  main  saving  is  in  the  cost  of  fuel. 
A  typical  freighter  operating  between  San  Francisco 
and  Valparaiso,  Chile,  making  five  trips  a  year, 
will  consume  on  each  voyage  an  average  of  231  tons 
of  oil  instead  of  597  tons  of  coal.  On  the  Pacific, 
the  average  cost  of  coal  suited  for  steam  purposes  is 
about  $6  per  ton  while  the  price  of  oil  is  $7.  This 
being  so  the  saving  in  the  cost  of  fuel  is  about  $10,000 
a  year.  Moreover  the  carrying  capacity  of  the  vessel 
is  increased  by  about  5  per  cent,  owing  to  the  fact  that 
smaller  space  is  occupied  by  the  propelling  machinery 
and  required  for  the  storing  of  oil.  Even  steel  can 
sometimes  be  carried  in  the  double  bottom. 

While  the  internal-combustion  engine  is  peculiarly 


2^2  SHIPPING 

adapted  to  freight  ships  up  to  about  5,000  gross  tons, 
it  is  not  limited  to  that  class  of  vessels.  Thus,  when 
the  Pacific  Mail  Steamship  Co.  planned  to  instal 
four  37,000  ton  steamers  in  the  New  York-Orient 
service  subsequent  to  the  opening  of  the  Panama 
Canal,  they  were  to  be  equipped  with  oil-burning  en- 
gines. President  Schwerin  estimated  that  the  cost 
of  oil  would  be  approximately  $4  a  ton  as  against 
$6.50  for  the  ton  of  coal. 

The  limiting  factor  of  the  Diesel  ship  is  that  the 
machinery  is  as  yet  too  delicate  to  stand  the  pound- 
ing of  the  North  Atlantic  winter.  The  vessels  are 
used  predominantly  in  the  warm  water  routes.^ 

5.  Future  of  the  sailing  ship. — Tho  the  sailing 
vessel  is  being  outclassed  more  and  more  by  its  more 
efficient  rival,  it  is  not  to  be  assumed  that  it  will  vanish 
altogether.  In  two  distinct  services,  its  usefulness 
will  probably  continue ;  in  the  coasting  trade,  which  for 
some  districts  and  some  products  is  irregular  and  can 
not  easily  be  organized  into  steamer  service;  and  in 
the  skirmish  work  of  international  trade,  which  must 
precede  the  establishment  of  new  steamer  connections. 
But  the  long  cherished  theory  that  the  sailing  vessel 
will  remain  the  exclusive  carrier  of  certain  classes  of 
bulky  commodities  on  long  voyages,  such  as  the 
nitrate  cargoes  from  Chile  to  Europe,  will  have  to  be 

1  A  refinement  of  the  Diesel  principle  in  ship  propulsion  is  found  on 
the  newest  U.  S.  war  vessels.  For  example,  the  "California"  has  oil- 
driven  engines  turn  its  dynamo,  while  motors  utilize  the  current  thus 
produced,  to  run  the  propellers. 


OCEAN  CARRIERS  223 

dismissed,  in  the  face  of  the  recent  development  in 
these  trades. 

6.  Replacement  of  wooden  by  iron  mid  steel  vessels, 
— Even  more  rapid  than  the  advance  of  the  use  of 
steam  for  propulsion  was  the  development  from  the 
wooden  to  the  iron  and  steel  hull.  The  Civil  War 
lent  a  strong  stimulus  to  this  movement  by  intro- 
ducing the  ironclad  into  the  war  fleets  of  the  world. 
The  new  theory  aroused  other  countries  more  strongly 
than  the  United  States,  Just  as  the  supremacy  of 
the  American  sailing  vessel  had  been  challenged 
by  the  British  steamer,  so  Great  Britain  also  took 
the  lead  in  the  construction  of  iron  and,  since  1880, 
steel  merchant  vessels.  In  England,  economic  con- 
ditions favored  this  transition  from  the  wooden  to 
the  metal  hull  just  as  they  impeded  the  same  develop- 
ment in  this  country.  England,  devoid  of  forests  and 
supplies  of  timber,  led  the  world  in  the  manufacture 
of  iron,  while  the  United  States  enjoyed  such  an 
abimdance  of  cheap  lumber  that  American  ship- 
builders were  loath  to  give  up  this  advantage.  The 
wooden  vessel  has  practically  disappeared  from  the 
merchant  marine  of  Great  Britain.  In  1916,  over 
99  per  cent  of  all  hulls  were  metal  (4/5  steel).  In 
the  United  States  up  to  1870  the  progi'ess  made  in 
the  construction  of  iron  hulls  was  neghgible  and  in 
1916  over  one-half  of  the  tonnage  under  the  American 
flag  was  of  wooden  construction  in  spite  of  the  unques- 
tionable superiority  of  metal  over  wood. 

7.  Classification  of  merchant  fleet  in  regard  to 

XV— 16 


S24 


SHIPPING 


service. — From  the  standpoint  of  service  rendered  we 
may  classify  the  modern  merchant  fleet  of  the  world 
in  the  following  way: 


1.  Freight 
Steamers 


2.   Combination 
Freight  and 
Passenger 
Steamer 


3.  Passenger 
Liners 


Running  as  tramps  (cotton  carriers,  serv- 
ing Galveston). 

Running  as  liners  (all  lines  to  South  Amer- 
ica except  Lamport  and  Holt). 

Primarily  Freight  (Leyland  Line,  Bos- 
ton). 

Half  and  Half  (S.S.  George  Washington). 

Primarily  Passengers  (North  German 
Lloyd). 

Express  lines,  with  emphasis  on  speed 
(Mauretania). 

Liners,  with  emphasis  on  luxury  (Impera- 
tor). 


This  detailed  classification  is  by  no  means  found  in 
every  trade  of  the  world.  It  is  found  at  its  highest 
stage  of  development  in  the  transatlantic  service,  par- 
ticularly that  connecting  the  North  Atlantic  ports 
with  the  northwest  of  Europe.  Here  is  found  the 
greatest  density  both  of  freight  and  passenger  traffic. 
This  traffic  naturally  attracts  the  powerful  steamship 
lines  of  all  countries. 

8.  Tramp  distinguished  from  liner. — From  the 
table  above  it  appears  that  while  tramps  are  exclu- 
sively employed  to  carry  freight,  liners  only  in 
exceptional  cases  (i.e.,  in  the  highest  stages  of  their 
development)  confine  themselves  to  passenger  service. 
Most  liners  carry  freight  besides  passengers;  some 
carry  freight  exclusively. 


OCEAN  CARRIERS  2!^5 

The  division  between  liner  and  tramp  is  the  most 
fundamental  in  the  classification  of  merchant  vessels. 
In  1912  the  oversea  commerce  of  the  world  was  con- 
ducted by  more  than  25,000  steamers  of  which  1,555 
were  liners.  The  remaining  23,500  vessels  were 
tramps.  While  the  liners  were  owned  by  barely  more 
than  one  hundred  companies  the  tramps  were  scat- 
tered among  approximately  4,100  companies,  firms, 
and  individuals.  The  liners  being  the  largest  vessels 
in  the  world's  shipping  industry,  it  is  only  natural  that 
when  gross  register  tonnage  is  taken  as  the  norm  of 
comparison  the  preponderance  of  the  tramp  is  con- 
siderably less  striking  than  appears  from  a  comparison 
of  the  numbers.  Thus  it  has  been  estimated  that  out 
of  44,000,000  tons  of  shipping  owned  in  the  world  in 
1912  two-thirds  were  tramps,  of  which  Great  Britain 
owned  at  least  70  per  cent. 

A  tramp  steamer  is  a  cargo  steamer  which  is  built 
for  hire  and  is  not  connected  with  any  particular 
service.  A  vessel  may  be  operated  either  singly  or  as 
the  member  of  a  line.  The  tramp  is  operated  as  a 
single  unit.  In  the  Report  of  the  Royal  Commission 
on  Shipping  Rings  the  difference  between  the  service 
supplied  by  the  liner  and  the  tramp  is  described  as 
follows : 

Tlie  tramp  loads  and  usually  discharges  at  one  port  and 
preferably  a  port  where  the  dues  are  small.  It  does  not  sail 
at  a  fixed  date,  but  waits  until  it  has  a  full  cargo.  More- 
over, the  tramp  does  not  confine  itself  to  a  particular  trade. 
It  comes  into  a  trade  when  the  freight  prospects  are  good  and 


226  SHIPPING 

leaves  it  when  they  are  bad.     It  acknowledges  no  obligation 
except  to  go  wherever  it  can  obtain  the  highest  freight. 

The  liner,  on  the  other  hand,  generally  sails  according  to 
a  fixed  time-table  almost  with  the  regularity  of  a  railroad 
train  and  she  sails  whether  full  or  not  full.  She  usually 
loads  and  discharges  at  several  ports  (to  serve  her  trade) 
and  consequently  has  large  expenses  in  port  dues  and 
charges,  and  most  important  of  all  she  stays  in  the  trade 
whether  the  times  are  good  or  bad.  Moreover,  whereas  in  the 
case  of  the  tramp  the  charter  party  usually  requires  the 
merchant  to  discharge  at  the  rate  of  so  many  tons  per  day 
with  heavy  penalties  for  demurrage,  the  discharging  in  the 
case  of  the  liners  is  effected  by  the  liners  themselves,  at  their 
own  risk. 

9.  Constnwtion  of  tramp  steamer. — First  of  all, 
the  tramp  steamer  is  a  comparatively  inexpensive 
vessel  built  for  the  sole  purpose  of  carrying  bulk 
cargoes  as  cheaply  as  possible.  Speed  being  a 
secondary  consideration  with  the  tramp  steamer,  its 
construction  can  be  planned  along  the  lines  of  gi'eatest 
carrying  capacity.  It  is  therefore  built  in  full  form 
upon  a  sort  of  general  average  model,  to  fit  it  for  as 
many  kinds  of  services  as  possible.  The  "block 
co-efficient"  of  a  tramp  steamer  is  usually  around  80 
per  cent,  while  that  of  a  fast  ocean  liner  is  hardly  more 
than  62  per  cent.  That  is,  if  you  were  to  pack  a 
tramp  in  a  rectangular  box  that  barely  contained  her 
she  would  occupy  80  per  cent  of  the  box;  while  the 
liner — being  cut  away  fore  and  aft — w^ould  fill  but  62 
per  cent  of  her  container. 

Further  economy  of  construction  of  the  tramp  is 
obtained  by  the   standardization   of  tramp   steamer 


OCEAN  CARRIERS  227 

building.    This  has  been  carried  to  a  high  degree  espe- 
cially in  Great  Britain. 

10.  Economies  of  the  tramp. — The  economies  of 
operation  of  the  tramp  steamer  center  around  the  low 
speed  adequate  for  its  service.  The  coal  consumed  by 
a  fast  liner  in  one  day  would  serve  the  average  tramp 
for  weeks.  It  is  a  well  known  law  of  physics  that 
high  speed  is  attained  at  a  much  greater  expenditure 
of  power  per  unit  than  that  required  to  traverse  the 
same  distance  at  a  lower  speed.  The  coal  consumed 
by  the  Mauretania  in  attaining  a  speed  of  25  knots  is 
not  double,  but  probably  20  times  the  amount  of  coal 
consumed  by  a  freighter,  assuming  the  latter  is  con- 
tent with  a  speed  of  12/4  knots.  Greater  speed  also 
demands  greater  engine  room,  bunker  space  and 
crew  accommodations,  thus  leaving  less  space  for 
freight.  The  advantage  of  greater  speed  is  more 
frequent  voyages  in  a  year  and  higher  freight  rates 
per  voyage.  Therefore  the  most  economical  speed 
will  be  determined  by  duly  weighing  the  favorable 
and  unfavorable  results  of  speed  increase.  The  point 
of  equilibrium  between  these  two  groups  of  factors 
will  be  constantly  raised  by  improvements  in  the  con- 
struction of  the  vessel  and  in  the  engine ;  at  present  it 
lies  at  about  11  knots  an  hour.  In  twenty  years  this 
most  economical  speed  was  increased  about  3  knots. 
In  the  same  period  the  most  advantageous  size  of 
tramp  has  increased  from  5,000  to  7,200  tons. 

11.  Occupation  of  the  tramp. — The  tramp  steam- 
er's chief  occupation  in  marine  transportation  con- 


228  SHIPPING 

sists  in  the  carrying  of  low-grade  freight  and  bulk 
goods  such  as  grain  from  the  Black  Sea,  Argentina, 
North  America,  and  India;  ore  from  Spain,  Chile  or 
Cuba;  timber  and  cotton  from  Gulf  ports;  nitrate 
from  Chile;  soy  beans  from  Manchuria;  sugar  from 
Java;  jute  from  India;  clay,  chalk  and  coal  from  Eng- 
land. Onh^  occasionally  do  manufactures  also  move 
in  full  cargo  lots.  The  International  Harvester  Com- 
pany ships  in  tramp  steamers  a  considerable  number 
of  full  cargoes  to  regions  like  the  Black  Sea  to  which 
there  is  no  adequate  liner  connection  from  this  coun- 
try, and  to  other  sections  which  possess  liner  connec- 
tions, but  do  not  afford  sufficient  liner  space  for  the 
heavy  seasonal  shipments  of  the  International  Har- 
vester Company. 

12.  Legal  status  of  the  tramp. — The  legal  status  of 
a  tramp  differs  essentially  from  that  of  the  liner.  The 
chief  distinction  is  that  only  the  latter  is  considered  a 
common  carrier.  It  l>as  been  well  established  by  a 
long  line  of  decisions  in  the  Federal  Courts  that  when- 
ever a  charter  party  gives  the  charterer  the  full  capac- 
ity of  a  ship,  the  owner  is  not  a  common  carrier,  but  a 
bailee  to  transport  as  a  private  carrier  for  hire.  When, 
however,  a  tramp  is  taken  out  of  its  regular  service 
and  is  made  a  part  of  a  line  service,  its  cargo  space 
being  rented  to  various  shippers,  the  tramp  of  course 
loses  its  peculiarity  and  becomes  a  common  carrier. 

Such  a  transfer  frequently  occurs.  In  nautical  lan- 
guage this  is  called  "keeping  the  tramp  on  the  beat." 
The  reverse  takes  place  when  a  liner  is  sent  "tramp- 


OCEAN  CARRIERS  229 

ing."  This  interchangeability  shows  that  the  line 
of  demarcation  between  the  hner  and  the  tramp  is 
not  so  clearly  drawn  as  sometimes  is  assumed.  It 
is  a  difference  in  ship  use,  not  in  ship  type.  This  nat- 
urally can  refer  only  to  the  lowest  type  of  line  vessel, 
i.e.,  that  which  is  confined  solely  to  the  carrying  of 
freight.  The  liner  in  its  higher  forms  of  develop- 
ment is  too  different  in  construction  to  allow  an  inter- 
change of  the  nature  described.  As  Kipling  said, 
"the  liner,  she's  a  lady,"  and  as  such  is  too  good  to  per- 
form the  menial  work  of  the  tramp.  The  liner  is  a 
thorobred,  while  the  tramp  is  the  truck-horse  of  the 
ocean. 

13.  Operation  and  management  of  liners. — From 
our  division  of  merchant  ships  into  seven  classes  it  is 
evident  that  considerable  difference  exists  between  the 
various  types  of  liners.  However,  there  are  certain 
principles  common  to  the  operation  and  management 
of  them  all.  High  cost  of  construction,  high  speed, 
high  cost  of  maintenance  and  management,  expensive 
office  and  soliciting  forces — these  all  drive  the  ex- 
penses of  the  regular  line  trade  far  beyond  the  point 
reached  in  the  charter  traffic.  But  these  expenses 
assure  the  liner  advantages  in  the  form  of  higher 
freight  rates,  lower  insurance  rates,  and  the  enjoy- 
ment of  a  reliable  clientele.  The  liner  monopolizes 
the  valuable  passenger  traffic  and  the  carriage  of  mail 
and  of  valuable  express  cargo. 

While  mixed  cargoes  of  general  merchandise  in  less 
than  cargo  lots  are  the  specific  domain  of  line  serv- 


230  SHIPPING 

ice,  there  are  certain  heavy  commodities  which  require 
hne  service.  Just  as  human  freight  exacts  certain 
considerations  from  the  shipbuilding  engineer,  so  do 
many  kinds  of  freight.  Thus,  perishable  goods  like 
carcasses  and  fruits  require  vessels  especially  con- 
structed for  their  transportation.  Australian  and  Ar- 
gentine meat,  and  bananas  from  the  West  Indies,  are 
not  carried  by  tramps,  but  by  liners  especially  adapted 
to  the  particular  requirements  of  these  trades. 

Even  the  carrying  of  coal  is  not  exclusively  re- 
served to  the  tramp  steamers.  In  the  short-voyage 
service  between  the  east  coast  of  England  and  Scot- 
land and  the  Continent,  especially  to  Hamburg  and 
Rotterdam,  it  pays  to  instal  automatic  discharging 
machinery  in  colliers  which  run  according  to  regular 
schedule.  Likewise,  the  gas  company  at  Boston  has 
a  regular  service  of  colliers  that  supply  it  with  coast- 
wise coal. 

A  concrete  illustration  of  the  various  types  of  ves- 
sels discussed  in  this  chapter  will  be  found  in  the 
following  table,  which  shows  the  capacity,  speed,  and 
power  of  a  typical  tramp,  a  freight-carrying  liner, 
several  combination  vessels  and  of  the  two  types  of 
purely  passenger  ships. 

Average 
Dead        speed 
Gross  Net  weight       at  sea   Indicated 

Vessel  tonnage     tonnage      capacity    (knots)      H.P. 

Tramp  i    I,()fi5  J,930  7,800  lOy.  2,500 

Freight-carrying  Liner 

"Norderney"   .5,496.6       3.573.51         7,700         IQi/.  2,000 


OCEAN  CARRIERS  231 

Average 
Dead       speed 
Gross  Net  Weight     at  sea    Indicated 

Vessel  tonnage  tonnage     Capacity  (knots)       H.P. 

Combination  Vessels 

"Breslau"     7,5;?4.09  4,807.86  8,600  12%  3,600 

"Minnewaska"     14,317  8,878  15,000  15             

"George   Washington".  35,569.85  15,378.74  13,300  IQi/o  21,000 

Express  Steamers 

'•Kronprinces.sin  Cecile"    19,503.22  6,584.44  8,300  23%  45,000 

"Bismarck"  2     56,000  24,000  15,000  25             

"Mauretania"    31,550  9,145  1,500  25  68,000 

1  Typical  tramp,  computed  from  latest  available  figures,  by  Engineer's 
Society  of  Northern  England. 

2  Approximate  figures. 

REVIEW 

In  the  modern  development  of  shipping  what  places  limits 
upon  the  size  of  vessels  ? 

Is  the  sailing  craft  likely  to  disappear  altogether  frotti  ocean 
commerce? 

What  advantages  result  from  the  substitution  of  oil  for  coal  as 
fuel,  and  what  appear  to  be  the  limitations  in  the  use  of  oil-burn- 
ing vessels.'' 

Wliat  is  a  tramp?  What  is  a  liner?  How  do  they  differ  in 
construction  and  in  legal  status  ? 

What  points  of  superiority  has  the  tramp  as  a  cargo  boat  over 
the  liner? 

How  does  the  trade  utilizing  the  liner  differ  from  that  em- 
ploying the  tramp? 


CHAPTER  III 

PUBLIC  AND  PRIVATE  CARRIERS 

1.  Epoch  of  the  merchant  carrier. — So  far  we  have 
followed  the  development  of  the  ocean  carrier  from 
the  standpoint  of  technical  improvement  and  of  serA- 
ice  rendered.  We  have  looked  upon  the  vessel  as  an 
instrument  for  the  interchange  of  commodities  and 
persons,  without  regard  to  its  relation  to  those  who 
furnish  the  cargo,  i.e.,  the  shippers.  The  shipper  is 
either  a  merchant  or  a  manufacturer.  The  relation 
between  these  two  classes  and  the  ship  owner  forms 
the  basis  of  the  following  discussion. 

Until  about  1812,  at  the  end  of  our  second  war  with 
Great  Britain,  the  unit  of  ocean  transportation  was 
the  single  private  vessel.  It  belonged  and  was  used 
by  a  merchant  or  a  roving  captain  and  his  associates, 
who  formed  a  trading  company  that  used  the  vessel. 
In  those  days  the  vessel  did  not  carry  for  all  shippers ; 
it  was  not  a  public  carrier. 

There  are  many  reasons  why  this  primitive  type 
was  not,  at  an  earlier  date,  superseded  by  the  public 
carrier.  First  of  all,  the  time  consumed  in  the  ex- 
change of  correspondence  and  documents  referring 
to  the  sale  of  and  payment  for  merchandise  was 
such  as  to  almost   prohibit  tlie   development   of   a 

232 


CARRIERS  233 

public  carrying  service,  whose  requisite  is  found  in 
the  sale  of  the  cargo  to  the  foreign  consignee  be- 
fore the  departure  of  the  vessel.  In  addition,  the 
present  form  of  consignment  shipments  is  based  on 
an  extremely  high  development  of  mercantile  organ- 
ization and  was  out  of  the  question  a  century  ago. 
In  those  days  it  was  only  natural  that  the  merchant 
himself  should  own  and  operate  the  ship,  and  there- 
fore that  each  vessel  should  be  the  trading  unit.  The 
small  sailing  vessel  then  used  coidd  easily  be  filled  by 
the  wares  of  one  enterprising  merchant.  It  was  not 
essential  whether  the  merchant  himself  conducted  the 
voyage  or  intrusted  his  wealth  to  a  reliable  captain 
or  to  a  "supercargo."  International  trade  consisted 
largely  of  luxuries  and  exotics,  and  only  a  few  firms 
dared  to  enter  this  adventiu'ous  business.  There- 
fore, both  the  steady  flow  of  merchandise  and  the  mul- 
titude of  shippers,  which  characterize  the  foreign  com- 
merce of  today,  were  lacking.  The  need  for  public 
carriers  did  not  exist.  Finally,  the  unsettled  condi- 
tions of  the  period  formed  an  unsiu'mountable  obsta- 
cle to  the  establishment  of  regular  trade  connections. 
Semi-piratical  conditions  prevailed  on  the  sea,  and 
foreign  navies  vied  with  privateers  and  pirates  in 
preying  upon  American  ships;  ordinary  commerce 
was  daring  adventure. 

2.  Coming  of  the  puhlic  carrier. — A  great  change 
in  shipping  practice  took  ])lace  when  men,  instead  of 
building  vessels  to  use  themselves,  built  them  to  be 
rented  or  chartered  to  shippers.     While  chartering 


234  SHIPPING 

is  almost  as  old  as  histoiy,  it  did  not  affect  the  western 
world  until  the  end  of  the  eighteenth  century. 

As  chartering  came  into  vogue  more  generally  it 
was  deemed  advisable  to  establish  foreign  branches 
and  agencies  who  took  care  of  the  cargo  after  delivery 
and  attended  to  the  assembling  of  a  return  cargo,  in 
imitation  of  the  great  East  India  companies.  This 
growing  organization  of  shipowners  proved  valuable 
in  the  subsequent  establishment  of  regular  steamship 
lines. 

Repeated  attempts  to  establish  such  lines  appear  to 
have  been  made  toward  the  close  of  the  eighteenth 
century,  but  not  until  peace  and  security  were  firmly 
established  were  these  efforts  crowned  with  success. 
Considerably  later,  when  the  flow  of  bulky  goods,  such 
as  timber,  grain,  coal,  and  ore,  had  become  so  continu- 
ous and  voluminous  that  the  full  cargo  lot  became  the 
unit  of  transportation,  the  modern  tramp  entered  the 
field.  Even  a  short  outline  of  the  development  of  the 
public  carrier  in  the  line  and  charter  traffic  would  lead 
too  far.  The  public  carrier  is  still  the  ship  of  today, 
and  wherever  private  carriers  are  found  they  have 
come  into  use  because  of  special  conditions  which  will 
be  discussed  below. 

3.  Renaissance  of  the  private  carrier. — The  main 
cause  of  the  return  of  the  private  carrier  is  to  be  found 
in  the  magnitude  of  the  modern  corporations.  This 
has  made  possible  the  handling  by  one  concern  of  such 
vast  quantities  of  coal,  iron,  petroleum,  asphalt,  fruits, 
and  other  products  that  the  use  of  steamship  lines 


CARRIERS  233 

as  part  of  a  single  business  has  become  economical. 

To  understand  this  development  we  must  ascertain 
why  the  services  of  either  the  modern  liner  or  the  mod- 
ern tramp  are  insufficient  to  satisfy  the  requirements 
of  twentieth  century  shippers.  It  is  true  that  the 
modern  liner  takes  large  quantities  of  bulk  commod- 
ities, but  this  portion  of  the  business  is  looked  upon  as 
a  by-product.  The  bulk  goods  serve  to  fill  the  space 
left  vacant  by  the  better-paying  general  merchandise. 
It  therefore  follows  that  if  commodities,  such  as  steel 
rails  and  the  like,  move  in  directions  where  general 
cargo  can  not  be  obtained,  it  would  not  pay  to  estab- 
lish a  public  line.  The  regularity  and  the  volume 
of  these  movements,  however,  sometimes  necessitate 
the  establishment  of  regular  sailings  for  the  private 
corporation.    The  result  is  the  private  line. 

Another  reason  for  the  establishment  of  private 
lines  may  be  found  in  the  necessity  of  providing  ves- 
sels built  especially  to  meet  the  requirements  of  a  par- 
ticular trade.  In  either  case,  the  same  factors  that 
favor  the  development  of  large-scale  production  and 
the  consohdation  of  enterprises  along  horizontal  as 
well  as  vertical  lines,  are  also  applicable  to  these  cases 
of  absorption  of  the  water-transportation  service  by 
the  manufacturing  or  producing  corporation. 

4.  Examples  of  private  carriers. — An  example  of 
the  first  case  of  private-line  establishment  is  the  serv- 
ice between  New  York  and  Brazil,  established  by  the 
United  States  Steel  Corporation,  inspired  by  large 


236  SHIPPING 

contracts  for  rail  and  other  steel  products  which  liad 
heen  secured  in  Brazil.  The  company  announced: 
"The  ships  of  this  line  will  seek  general  cargo  in  addi- 
tion to  that  supplied  by  the  Steel  Corporation  for  its 
Brazilian  customers,  and  furthermore,  whether  loaded 
or  not,  the  ships  will  return  from  Brazil  direct  to  New 
York." 

The  best  example  of  the  establishment  of  a  private 
steamship  line  to  meet  the  special  requirements  of  a 
particular  trade  is  afforded  by  the  United  Fruit  Com- 
pany. The  fact  that  this  company  has  gradually  de- 
veloped into  one  of  the  greatest  common  carriers  of 
this  country  makes  this  case  particularly  interesting. 
This  line  is  still  a  private  steamship  line,  because  the 
carrying  of  passengers  and  general  freight  is  only 
incidental  and  a  by-product  of  the  transportation  of 
the  company's  own  products,  bananas  and  sugar. 

5.  United  Fruit  Company  and  the  Banana  trade. — 
The  United  Fruit  Company  operates  or  controls  the 
majority  of  the  steamers  engaged  to  carry  bananas 
and  other  fruit  from  the  West  Indies  and  the  Carib- 
bean regions  to  the  United  States  and  Europe.  The 
banana  trade  is  comparatively  young.  Only  twenty 
years  ago  the  banana  was  a  luxury.  While  the 
banana  trade  was  undeveloped,  all  of  it  was  carried  by 
tramps  chartered  either  for  one  voyage  or  for  a  season. 
The  ordinary  tramp  vessel  proved  too  slow  to  render 
satisfactory  service  to  the  banana  shipper.  A  ship- 
builder, however,  will  not  construct  a  vessel  suitable 
for  only  one  particular  purpose  unless  constant  em- 


CARRIERS  rSl 

ployment  is  guaranteed.  Either  he  will  sell  it  or,  if 
it  is  to  be  chartered,  he  will  insist  upon  a  time  charter 
covering  a  considerable  number  of  years.  This  diffi- 
culty in  supplying  necessary  and  suitable  tramp 
tonnage  for  the  banana  shipments,  coupled  with  the 
increasing  demand  for  regularity  in  the  trade,  led  to 
the  establishment  of  the  line  service  of  the  United 
Fruit  Company  in  1899. 

The  largest  ship  employed  by  this  company  during 
the  first  year  of  its  existence  was  a  vessel  of  2,000  tons, 
and  had  a  storage  space  for  35,000  bunches  of  ba- 
nanas. During  the  early  years  all  the  company's 
ships  were  chartered  from  Norwegian  or  other  foreign 
owners.  Soon  it  became  necessary  to  acquire  vessels 
better  suited  for  the  carrying  of  bananas  northbound 
and  of  the  general  merchandise  which  was  sought  as  a 
return  cargo.  This  led  to  the  upbuilding  of  the 
"Great  White  Fleet,"  a  line  of  stately  steamers  which 
are  among  the  best  of  all  the  ships  sailing  under  the 
American  flag.  This  flag  does  not  fly  on  all  of  the 
forty-three  vessels  which  today  form  the  fleet  of  the 
United  Fruit  Company,  representing  a  gross  register 
tonnage  of  over  200,000  tons;  about  one-half  are 
under  British  registry,  and  a  certain  percentage  are 
still  under  Norwegian  registry. 

6.  Coal  and  petroleum  carried  by  private  lines. — 
Other  trades  in  which  private  or  industrial  lines  ^  have 

1  Among  examples  of  private  or  industrial  lines  in  Canada  may  be 
mentioned  the  steamers  operated  by  the  Dominion  Coal  Co,  (the  Black 
Diamond  Line),  the  Nova  Scotia  Steel  and  Coal  Co.,  and  the  United 
Fruit  Companies  of  Nova  Scotia,  Limited. 


238  SHIPPING 

been  established  are  the  asphalt,  lumber,  coal  and 
petroleum  trades.  Recently  the  Pocahontas  Consol- 
idated Collieries  Company,  together  with  the  Poca- 
hontas Fuel  Company,  formed  the  Pocahontas 
Navigation  Company.  They  have  acquired  a  fleet  of 
steel  vessels  of  over  5,000  tons  each,  which  carries  coal 
and  other  merchandise  to  foreign  ports. 

A  more  conspicuous  example  is  offered  by  the  pe- 
troleum trade.  Here  the  special  tank  vessels  offer 
great  advantages  with  respect  to  greater  utilization 
of  the  cargo  space  of  the  vessel  and  elimination  of 
unnecessary  handling.  These  advantages  are  so 
great  that  even  the  impossibility  of  taking  return 
freight  and  the  consequent  expense  of  ballast  voy- 
ages cannot  offset  them.  Only  large  concerns  with 
large  capital  can  afford  to  engage  in  this  business, 
for  not  only  must  the  vessel  be  supplied,  but  heavy 
capital  investments  are  required  to  build  pipe  lines 
from  the  well  to  the  shore,  and  to  furnish  pumps, 
tanks  and  other  equipment  at  the  seaboard. 

In  recent  years  the  tank  steamer  has  begun  to  be 
superseded  by  the  tank  barge,  a  tank  vessel  which  does 
not  proceed  under  its  own  steam  but  is  towed  by  a 
tug.  These  barges  are  no  novelty  in  the  American 
coastwise  trade,  and  now  they  even  cross  the  Atlantic. 

7.  Merchants'  private  lines. — The  examples  of  pri- 
vate lines  given  so  far  are  industrial  lines,  lines  con- 
trolled by  the  manufacturer  or  producer.  But  mer- 
chant houses  have  grown  into  such  powerful  and 
wealthy  corporations  that  the  volume  of  their  business 


CARRIERS  239 

justifies  the  establishment  of  their  own  lines.  Thus 
W.  R.  Grace  and  Company,  one  of  the  largest  mer- 
cantile firms  of  the  United  States,  owns  the  "Mer- 
chant's Line,"  furnishing  bi-monthly  service  from 
Xew  York  to  all  ports  on  the  West  coast  of  South 
America.  The  latest  ships  in  this  trade,  like  the 
Santa  Barbara^  are  of  as  much  as  10,000  tons  dis- 
placement. W.  R.  Grace  and  Company  recently  ac- 
quired several  vessels  of  the  former  Pacific  Mail 
Steamship  Company.  A  much  younger  but  very 
keen  rival  is  the  firm  of  Gaston,  Williams  and  Wig- 
more,  which  altho  not  yet  owning  its  ships,  keeps  up 
a  regular  line  service  by  means  of  chartered  vessels. 
The  German  steamship  line  known  as  the  Woer- 
mann  Line  was  originally  established  as  a  branch  of 
the  famous  Hamburg  mercantile  house  of  Woermann. 
The  Elder  Dempster  line  of  Liverpool  is  owned  by 
the  same  people  who  control  the  trading  firm  of  that 
name.  However,  in  their  present  form  these  lines 
could  hardly  be  classed  as  private. 

8.  Pacific  Ocean  and  the  railroad-steamsliip  line. — 
The  Pacific  Ocean,  because  of  the  length  of  passage 
and  the  absence  of  purely  local  traffic,  seems  to  be  the 
natural  sphere  of  the  railroad-steamship  line.  Until 
recently  the  Pacific  Mail  Steamship  Company,  con- 
trolled by  the  Southern  Pacific  Railroad,  divided  the 
field  with  the  Great  Northern  Steamship  Company 
of  the  Hill  roads,  the  Pacific  service  of  the  Canadian 
Pacific  Railroad  and  certain  Japanese  lines.  Of 
these  the  Canadian  Pacific  Company,  with  its  fines  on 

XV— 17 


S540  SHIPPING 

both  oceans,  is  by  far  the  most  powerful  of  all  the 
railroad-steamship  lines.  It  is  encouraged  and  sub- 
sidized by  the  British  and  the  Dominion  governments 
and  has  done  much  to  build  up  the  trade  and  com- 
merce of  our  neighbor  in  the  north.  United  States 
railroads  have  proved  their  enterprising  spirit  by  es- 
tablishing trans-oceanic  services  on  the  Atlantic. 
Thus,  the  Pennsylvania  Raikoad  Company  partici- 
pated in  the  establishment  of  the  American  Line  to 
Liverpool.  The  present  Johnston  Line  from  Balti- 
more to  Liverpool  was  originally  owned  by  the  Balti- 
more and  Ohio  Raih'oad. 

9.  Foreign  railroad- steamship  lines. — In  Eng- 
land the  railroad-owned  steamship  line  is  common  in 
almost  all  the  shorter  routes  from  ports  on  the  east 
coast  to  the  Continent  and  also  in  the  service  across 
St.  George's  Channel  and  the  Irish  Sea,  separating 
Ireland  from  Great  Britain.  Thus  the  North  Eastern 
Railroad  runs  a  line  in  its  own  name  from  Hull  to  a 
large  number  of  Continental  ports.  The  Lancashire 
and  Yorkshire  Railroad  has  services  to  nine  ports  of 
the  Continent  and  to  Scandinavia.  The  British  rail- 
roads have,  thus  far,  not  entered  the  trans-oceanic 
business ;  and  there  is  little  reason  to  believe  that  they 
will  do  so  in  the  future,  because  of  the  splendid 
steamer  connections  between  almost  all  ports  of  mod- 
erate significance.  The  oversea  needs  of  the  country 
seem  to  be  adequately  covered  now. 

To  those  who  are  anxious  to  see  the  American  flag 
on  the  ocean  restored  to  the  place  of  honor  it  once 


CARRIERS  241 

held,  the  effect  of  hostile  legislation  on  the  growth  of 
American  railroad-steamship  lines  must  seem  one  of 
the  most  mifortunate  occurrences  of  recent  economic 
history.  The  Pacific  Mail  in  1912  asked  permission 
to  build  four  37,000  ton  American  liners  to  run  from 
New  York  to  the  Orient  thru  the  Panama  Canal, 
calling  at  San  Francisco.  These  boats,  in  addition  to 
the  large  boats  which  the  Pacific  Mail  already  had, 
would  have  given  us  an  excellent  fortnightly  serv- 
ice to  the  Far  East.  Congress  refused  to  let  these 
boats  cany  freight  from  New  York  to  San  Francisco, 
a  service  which  alone  would  have  made  the  venture 
profitable. 

REVIEW 

Why  could  not  public  ocean  carriers  grow  up  under  trade  con- 
ditions of  the  eighteenth  century? 

What  conditions  have  favored  the  growth  of  public  carriers  ? 

Describe  the  private  carriers  established  on  the  ocean  by  vari- 
ous manufacturing  concerns. 

Name  some  of  the  more  important  lines  operated  by  mer- 
chants. 

Explain  how  railroads  came  to  enter  the  field  of  ocean  trans- 
portation. 


CHAPTER  IV 

OCEAN  FREIGHT  SERVICE 

1.  Growth  of  sea-home  trade. — The  nineteenth 
century  has  witnessed  a  greater  expansion  of  ocean 
commerce  than  all  the  centuries  past.  The  British 
foreign  trade  in  coal,  which  is  by  far  the  most  volumi- 
nous branch  of  the  world's  shipping,  has  grown  from 
its  insignificant  beginnings  of  100  years  ago  to  the 
almost  incredible  size  of  65,000,000  tons.  To  grasp 
the  real  meaning  of  this  figure,  one  should  think  of  an 
ordinary  railroad  freight  car  of  a  capacity  of  25  tons, 
and  imagine  a  line  of  2%  millions  of  such  cars  stretched 
out  across  the  surface  of  the  earth.  To  be  sure,  no 
other  branches  of  the  trade  of  the  world  even  approach 
the  magnitude  of  these  figures.  "When  compared  with 
the  insignificant  amount  which  represented  the  com- 
modity exchange  of  only  100  years  ago,  the  following 
figures  showing  the  bulk  of  the  exports  and  imports 
of  the  United  States  are  astonishing: 

BULK  OF  EXPORTS  AND  IMPORTS 

APPROXIMATE    TONNAGE    OF    DOMESTIC    EXPORTS, 
FISCAL  YEAR   1914 

Cotton    2,220,000  tons 

Mineral  oils 4,100,000  tons 

Fertilizer    1,540,000  tons 

242 


FREIGHT  SERVICE  243 

Coal  (except  Canada) 4,500,000  tons 

Naval  stores    85,000  tons 

Oil  cake 750,000  tons 

Tobacco 200,000  tons 

Wheat    170,000  tons 

Cora 220,000  tons 

Oats 28,000  tons 

Rye    55,000  tons 

Dried  grain 60,000  tons 

Lumber  (all  kinds) 3,180,000  tons 

APPROXIMATE    TONNAGE    OF    DOMESTIC    IMPORTS, 
FISCAL    YEAR    191  i 

Sugar  (taxable)    3,225,000  tons 

Coffee 440,000  tons 

Iron  ore 1,490,000  tons 

Nickel  ore   36,000  tons 

Copper  ore    445,000  tons 

Sulphur  ore 832,000  tons 

Manganese  ore    228,000  tons 

Asphaltum   140,000  tons 

Kainit     540,000  tons 

Potash    285,000  tons 

Manure  salts ^60,000  tons 

Guano     22,000  tons 

These  figures  illustrate  the  volume  of  the  ocean 
traffic  of  today.  So  far  as  its  weight  is  concerned, 
there  are  no  statistics  showing  the  growth  of  the 
foreign  trade  of  the  United  States.  It  may  be 
assumed  that  the  relation  of  weight  to  value  has 
remained  almost  the  same,  or  that  the  increase  of  the 
value  of  exports  relative  to  weight  has  been  offset  by 
a  decrease  in  the  case  of  imports.  The  following 
table,  therefore,  which  gives  the  value  of  exports  and 


244  SHIPPING 

imports  for  the  last  fifty  years,  supplies  an  indieation 
of  the  increasing  weight  of  our  foreign  trade ; 

FOREIGN    TRADE    OF   THE    UNITED    STATES    AND    CANADA^ 

(in  millions  of  dollars) 
United  States  Canada 

Exports     Imports     Exports    Imports 

1850  144  173 

1860  334  354 

1870  393  436  74  75 

1880  836  668  88  86 

1890  742  789  97  122 

1895  808  732  114  111 

1900  1,395  850  192  190 

1905  1,519  1,118  203  267 

1910  1,745  1,557  301  392 

1911  2,049  1,527  297  4*72 

1912  2,204  1,653  315  559 

1913  2,466  1,813  393  692 

1914  2,365  1,894  479  651 

1915  2,769  1,674  491  629 

1916  4,334  2,198  883  565 

1  The  corresponding  figures  for  Canada  have  been  added  as  illustrating 
the  same  point.  The  ten-fold  increase  in  values  since  1870  probably  indi- 
cates a  like  increase  in  weight  or  bulk. 

2.  Evolution  of  the  freight  service. — We  have  seen 
that  in  the  early  days  the  merchant  was  his  own  ship- 
owner. As  long  as  this  condition  prevailed  no  market 
for  ship  tonnage  existed.  The  first  beginnings  of 
such  a  market  are  found  in  the  earliest  phases  of  the 
charter  business.  A  merchant  or  a  group  of  mer- 
chants would  charter,  i.  e.  lease,  a  whole  ship  for  one 
round  voyage.  Cargo  lots  were  the  unit  of  trade, 
while  "berth  cargo"  or  "part  cargo"  is  an  outgrowth 
of  later   developments.     The   earliest   fbrm   of   the 


FREIGHT  SERVICE  245 

charter  business  employed  the  trip  charter  exchisively, 
as  the  uncertainty  of  wind  conditions  made  the  time 
charter  appear  too  risky;  and  until  the  merchant 
system  was  superseded  by  the  commission  house  sys- 
tem, the  trip  charter  remained  the  prevailing  manner 
of  chartering. 

The  growth  of  the  size  of  the  vessel  made  it  appear 
more  and  more  difficult  for  one  party  to  assemble  a 
full  cargo.  Furthermore,  the  growing  variety  of 
merchandise  and  the  development  of  an  increasing 
number  of  markets  resulted  in  a  growing  number  of 
part-cargo  shipments  calling  for  space.  This  traffic 
grew  so  rapidly  that  in  Hamburg  as  early  as  1800 
part  cargoes  had  become  more  frequent  than  whole 
ship  loads. 

3.  Berth  traffic. — The  traffic  in  early  times  was 
too  iiTegular  for  line  service  to  exist.  The  boats 
that  were  rented  or  chartered  to  various  shippers 
were  merely  *'put  on  the  berth."  That  means,  a 
shipowner,  with  the  aid  of  brokers  who  were  in  touch 
with  the  merchants,  offered  his  ship  for  a  particular 
voj^age  to  all  who  wished  to  use  it.  Sometimes  the 
brokers  would  take  the  initiative,  and  would  them- 
selves charter  vessels  for  the  purpose  of  putting  them 
on  the  berth.  While  this  was  the  customary  method 
of  shipping  general  merchandise  during  the  time  when 
line  traffic  had  not  yet  developed,  today  a  ship  is  only 
occasionally  put  on  the  berth.  This  occurs  more 
frequently  at  the  end  of  a  route,  where  more  freight 
has  been  received  than  is  ready  to  be  dispatched.     A 


^46  SHIPPING 

freighter  may  also  be  employed  in  berth  traffic  in 
order  to  fight  exorbitant  liner  rates, 

4.  Line  traffic. — As  the  traffic  in  general  mer- 
chandise gi'ew  in  volume  and  regularity  along 
definitely  estabhshed  trade  routes,  berth  traffic  gave 
way  to  regular  line  service  which  follows  definite 
schedules.  Vice  versa,  the  organization  of  hne 
services  acted  as  a  strong  stimulus  to  the  growth  of 
the  exchange  of  commodities.  Today  the  liner  has 
almost  complete  control  over  the  movement  of  general 
merchandise,  while  bulk  goods  are  the  domain  of  the 
tramp.  In  the  charter  traffic  the  introduction  of 
steam-power  resulted  in  the  emancipation  of  shipping 
from  the  uncertainty  of  weather  conditions,  and 
thereby  brought  about  a  change  from  the  trip  charter 
to  the  tune  charter. 

5.  Modern  charter  market. — This  development  has 
its  center  in  a  few  ports  near  the  North  Sea  basin. 
Here,  in  close  vicinity,  located  in  the  great  European 
ports,  such  as  Le  Havre  and  Liverpool,  are  the  domi- 
ciles of  the  great  shipping  companies  of  the  world. 
Great  Britain  and  northwestern  Europe  attract  num- 
berless tramps  which  either  seek  this  section  of  the 
world  as  the  destination  of  their  cargo  or  as  the  source 
of  an  outward  cargo.  The  latter  is  hardly  ever  lack- 
ing because  of  an  endless  stream  of  British  coal  which 
flows  to  ahnost  every  corner  of  the  globe.  It  is  there- 
fore not  surprising  that  the  entire  charter  trade  is 
directed  from  central  points  located  in  this  part  of 
the  world;  particularly  in  London,   Hamburg   and 


FREIGHT  SERVICE  247 

Rotterdam.  Tramps  that  come  to  New  York  for 
instance,  do  not  ordinarily  make  their  engagements 
here,  but  are  chartered  in  one  of  these  great  charter 
markets  of  Europe.  The  centrahzation  of  the  charter 
market  of  the  world  in  a  relatively  small  area  is 
rendered  possible  by  the  development  of  all  means 
of  communication,  particularly  the  telegraph  and 
telephone.  The  gradual  completion  of  the  net  of 
international  cables  and  the  instalment  of  wireless 
j)lants  are  the  basis  of  the  organization  of  the  modern 
charter  market,  bringing  a  multitude  of  local  estab- 
lishments into  one  great  international  organization. 

The  overwhelming  preponderance  of  Great  Britain 
in  the  charter  trade  is  due,  first  to  the  fact  that  its  coal 
export  furnishes  the  steadiest  employment  to  tramps, 
secondly  to  the  general  superiority  of  Great  Britain 
in  the  shipbuilding  industiy,  and  in  the  construction 
of  tramps  in  particular,  and  thirdly  to  the  fact  that  for 
generations  British  capital  has  been  so  freely  lent  to 
those  who  wish  to  build  tramp  steamers  that  even  in 
times  of  depression  the  construction  of  tramps  has 
hardly  slackened.  The  resulting  supply  forms  a 
chronic  danger  to  the  sound  development  of  the 
w^orld's  freight  market.  In  years  of  greatest  depres- 
sion large  numbers  of  tramps  lie  idle  awaiting  only  a 
slight  increase  of  the  freight  rate  in  their  eager  search 
for  cargo. 

6.  Operation  of  charter  business. — The  ingenious 
solution  of  the  great  world  puzzle  of  bringing  together 
more  than  twenty-four  thousand  tramp  vessels  scat- 


248  SHIPPING 

tered  over  all  oceans,  en  route  to  hundreds  of  ports 
in  all  climes,  with  the  freight  equally  scattered,  is  ad- 
mirably described  by  Professor  J.  R.  Smith  in  the 
following  way: 

The  method  of  securing  cargoes  for  ships,  and  ships  for 
cargoes,  is  best  described  by  the  relation  of  some  common 
incidents  of  every  day  occurrence.  A  Liverpool  shipowner 
had  a  steamer  in  the  Mediterranean  loaded  with  jute,  which 
she  was  carrying  from  Calcutta  to  Dundee.  The  owner  de- 
sired another  cargo  for  the  steamer  at  the  end  of  the  voy- 
age. Knowing  there  was  nothing  in  Dundee  he  wrote  to  his 
agent  in  Newcastle,  and  himself  made  inquiries  among  the 
shippers  of  Liverpool.  The  Newcastle  man  suggested  a 
cargo  of  coal  to  Hamburg,  but  this  the  owner  declined,  and 
sought  the  aid  of  his  correspondent  in  Dumbarton,  but  the 
iron  trade  of  Dumbarton  was  not  promising.  Meanwhile, 
the  days  were  passing,  the  vessel  had  reached  Dundee  and 
there  was  nothing  provided  for  her.  The  Liverpool  man 
was  himself  the  correspondent  of  a  London  firm  of  ship- 
brokers  who  telegraphed  him  at  this  juncture  that  they  had 
offers  of  a  shipment  of  German  coke  to  go  from  Rotterdam 
to  Santa  Rosalie,  lower  California,  and  of  another  of 
Cardiff  coal  for  Buenos  Aires.  The  first  the  shipowner  de- 
clined as  being  only  suitable  for  a  sailing  vessel,  and  because 
of  news  from  across  the  Atlantic  he  allowed  the  second  to 
go  to  a  steamer  then  lying  at  Antwerp.  Three  days  before 
this  he  had  cabled  to  his  New  York  correspondent  a  descrip- 
tion of  the  steamer,  and  offered  his  services  to  carry  grain  to 
the  United  Kingdom  at  a  certain  rate,  saying  that  she 
could  load  after  a  certain  date  or  between  certain  dates. 
As  New  York  freight  was  dull,  the  firm  in  that  city  tele- 
phoned their  Boston  and  Philadelphia  agencies.  At  the 
same  time  a  Chicago  grain  exporter  decided  to  export  150,- 
000  bushels  of  corn,  and  telegraphed  to  his  agents  in  New 
York  and  Philadelphia  to  secure  offers  of  transportation. 
In  the  shipping  exchanges  of  those  cities  the  representatives 


FREIGHT  SERVICE  2i9 

of  the  Chicago  exporter  and  the  Liverpool  shipowner  bar- 
gained face  to  face.  Offers  were,  however,  made  at  the 
same  rate  by  the  New  York  representative  of  the  owner  of 
a  ship  then  off  Rio  Janeiro  with  a  cargo  of  Chilean  nitrate 
bound  for  New  York,  and  also  by  a  Philadelphia  broker  who 
sought  future  employment  for  a  vessel  then  in  the  Red  Sea 
with  a  cargo  of  Java  sugar  for  Philadelphia.  The  wary 
broker  held  aloof  for  a  few  hours  in  the  effort  to  beat  down 
the  rate.  The  Liverpool  owner  was  informed  of  this  com- 
petition, and  still  having  nothing  for  his  steamer  he  cabled 
that  he  would  charter  his  ship  for  three  pence  (six  cents) 
less  per  ton  than  he  had  offered,  or  for  the  same  rate  he 
would  take  freight  to  Continental  ports  as  far  as  Copen- 
hagen. He  added  to  his  cablegram  the  word  "range,"  which 
means  in  cable  code  that  he  would  send  the  ship  to  the  Dela- 
ware bay  with  the  understanding  that  she  might  be  ordered 
to  New  York,  Philadelphia,  Baltimore,  or  Norfolk  to  load. 
This  offer  secured  the  freight,  for  the  representatives  of  the 
sugar  ship  and  the  nitrate  ship,  having  more  time  at  their 
disposal,  preferred  to  take  chances  rather  than  cut  rates. 
The  steamer  which,  pending  negotiations,  had  proceeded  to 
Newcastle,  coaled  and  anchored,  departed  thence  in  ballast 
for  the  Delaware.  Meanwhile,  the  Chicago  exporter  found 
that  railroad  conditions  made  Norfolk  the  most  convenient 
port  to  which  to  deliver  his  corn  at  the  appointed  time. 
When  the  steamer  reached  the  Delaware  breakwater  (just  in- 
side Cape  Henlopen),  the  captain  received  telegraphic  in- 
structions to  go  to  Norfolk.  There  he  loaded  a  full  cargo  of 
corn  and,  as  the  final  destination  of  the  corn  was  still  unde- 
cided, he  sailed  to  the  Channel  port  of  Falmouth  for  orders. 
LTpon  being  sighted  there,  he  was  instructed  by  signal  to  pro- 
ceed to  Copenhagen,  where  the  corn  was  discharged  and  the 
vessel  was  ready  for  another  contract  which  the  agents  had 
been  trying  to  arrange  since  the  day  they  learned  of  the  final 
destination  of  the  corn  cargo. 

7.  Port  of  destination. — This  is  a  typical  operation 
in    the    charter    business.     As    appears    from    the 


250  SHIPPING 

example  just  given,  the  exact  port  of  destination  at 
which  a  vessel  is  to  discharge  her  cargo  need  not  be 
named  in  the  charter  party.  Phrases  such  as  "one 
safe  port  on  the  continent  between  Havre  and  Ham- 
burg both  inclusive"  or  "U.  K.  H.  H.  range"  (mean- 
ing United  Kingdom,  Hamburg,  and  Havre)  are 
commonly  found.  Cork,  a  port  at  the  southwestern 
coast  of  Ireland,  is  frequently  named  in  charter  parties 
as  the  port  at  which  a  vessel  is  to  call  for  orders 
announcing  the  final  destination.  The  shipper  wishes 
to  delay  his  final  decision  as  to  the  place  of  delivery 
of  the  cargo  to  the  last  possible  moment  to  take 
advantage  of  market  developments,  especialh^  price 
fluctuations.  This  practice  of  "calling  at  Cork  for 
orders"  corresponds  to  the  practice  of  diversion 
and  reconsignment  in  railroad  transportation.  The 
instalment  of  the  wireless  apparatus  on  tramp  steam- 
ers will  bring  further  development,  for  thereby  the 
shipper  will  be  kept  in  constant  touch  with  his  vessel. 
The  fact  that  the  negotiations  between  shippers  and 
shipowners'  representatives  are  conducted  in  ex- 
changes should  not  lead  to  the  belief  that  tonnage 
has  in  any  way  become  negotiable  and  can  therefore 
be  traded  in  generic  terms  without  reference  to  a  par- 
ticular vessel.  It  is  true  that  phrases  such  as  "handy 
vessel,"  or  "moderate-sized  vessel"  are  found  in 
charter  parties,  but  they  are  invariably  supplemented 
by  particulars  naming  a  specific  vessel.  The  basis  of 
negotiability  is  standardization,  and  while  considerable 
progress  has  been  made  in  standardizing  charters  and 


FREIGHT  SERVICE  251 

in  developing  standard  types  of  vessels,  this  process 
has  by  no  means  reached  a  negotiable  point. 

8.  Ship-brokers. — In  view  of  the  complex  natm*e 
of  the  charter  party  it  is  not  surprising  to  find  that 
almost  all  charter  parties  are  carried  out  thru  the  office 
of  a  broker.  The  merchant  or  manufacturer  who 
wishes  to  charter  a  vessel  has  no  way  of  gauging  the 
supply  and  demand  of  vessel  tonnage.  Here  the 
middleman  is  indispensable.  The  brokers,  being  in 
constant  touch  with  each  other,  as  well  as  with  shippers 
and  shipowners,  are  in  a  position  to  exercise  a  steady 
and  equalizing  influence  upon  the  formation  of  charter 
rates  by  publishing  market  conditions  in  private 
reports  and  in  such  papers  as  Lloyd's  List  and  Ship- 
ping Gazette,  Fairplay,  and  others.  In  some  cases 
the  broker  has  authority  to  act  as  agent  for  shipper 
or  shipowner.     He  seldom  is  a  shipowner  himself. 

9.  Charter  parties. — The  terms  "trip  charter"  and 
"time  charter"  explain  themselves,  but  a  few  words 
should  be  said  regarding  the  extent  of  their  applica- 
tion. In  the  case  of  a  trip  charter,  which  may  cover 
either  a  single  or  a  round  trip,  the  shipper  usually 
agrees  to  pay  a  given  sum  per  ton  of  cargo,  or,  in  the 
case  of  grain,  so  much  per  bushel.  If  the  vessel  is 
chartered  on  time,  i.e.,  for  a  period  of  three  months 
or  a  year  or  more,  the  rate  is  usually  based  on  the 
dead-weight  capacity  of  the  vessel.  While  under  the 
trip  charter  the  owner  ordinarily  pays  for  all  expenses 
of  operating  the  ship,  including  even  port  charges, 
under  the   time   charter   the   owner   pays   the   crew 


252  SHIPPING 

and  provides  for  food  and  maintenance  and  also  keeps 
the  ship  in  repair. 

10.  Operation  of  line  traffic. — The  handhng  of  the 
charter  traffic,  because  of  the  uniformity  of  cargoes, 
is  simple  when  compared  with  the  intricate  system 
prevailing  in  the  line  business.  In  the  line  busi- 
ness each  cargo  consists  of  a  multitude  of  shipments 
each  of  which  represents  a  separate  transaction. 
Usually,  each  shipment  consists  of  various  items  which 
require  different  freight  rates  according  to  their  value 
and  volume.  Tho  rate  sheets  are  issued  by  the 
steamship  companies,  covering  certain  articles,  these 
rate  sheets  are  not  binding.  They  are  merely  "for 
information."  The  printed  rates  must  be  confirmed 
for  each  item  shipped  on  a  certain  steamer.  Even 
forwarding  agents  and  commission  houses  doing  a 
large  and  regular  business  have  to  make  sure  in  each 
case  what  the  rate  will  be. 

Occasionally,  large  shippers  who  can  calculate  in 
advance  the  amount  of  space  tliey  will  require  for  their 
shipments  in  a  given  direction  during  a  certain  period, 
will  make  time  contracts  specifying  rates  either 
directly  with  the  carrier  or  with  the  freight  forwarder. 
These  contracts  are  usually  made  on  the  basis  of  the 
rates  current  at  the  time  of  the  contract.  The  shipper 
prefers  a  steady  rate  on  which  to  base  his  sales.  The 
agent  of  the  steamship  company  is  willing  to  accept  a 
lower  rate  if  he  can  thus  secure  all  of  the  shipper's 
business  and  avoid  competition.  But  contracts  of 
this  nature  are  being  more  and  more  avoided  by  the 


FREIGHT  SERVICE  253 

steamship  companies.  They  chiim  that  if  the  current 
rate  goes  up  they  lose,  if  it  goes  down  the  shipper 
"squeals." 

11.  Seaboard  brokers. — In  our  discussion  cover- 
ing the  methods  employed  in  handling  foreign  ship- 
ments it  was  mentioned  that  a  great  many  of  these 
shipments,  especially  those  originating  in  inland 
points,  were  carried  out  thru  the  medium  of  freight 
forwarders  or  seaboard  brokers. 

The  seaboard  broker's  services  are  twofold  in 
their  nature.  One  part  of  their  value  consists  in  the 
saving  of  trouble  arising  from  the  multitude  of  details 
that  have  to  be  attended  to  when  making  foreign  ship- 
ments ;  the  other  part  results  in  a  saving  of  freight  on 
both  the  land  and  water  carriage. 

In  the  case  of  shipments  to  certain  foreign  destina- 
tions, primarily  Europe,  the  raih-oads  issue  thru  rail- 
and-ocean  bills  of  lading  and  their  foreign  freight 
agents  attend  to  the  transfer  of  goods  at  the  seaboard. 
In  other  cases  the  shipper,  unless  he  has  an  expert 
organization  of  his  own  or  sells  abroad  thru  a  com- 
mission house,  employs  a  forwarder  to  handle  his 
shipment  at  the  seaboard. 

12.  Cost  of  employing  forwarding  houses. — Ship- 
ping thru  a  responsible  forwarding  house  is  not 
expensive  when  one  considers  the  various  duties  per- 
formed by  this  party.  He  receives  the  consignment 
from  the  railroad,  has  it  carted  to  the  steamer,  takes 
©ut  insurance,  attends  to  the  certification  before  the 
foreign  consul,  ships  the  goods,  and  in  some  cases 


254  SHIPPING 

renders  additional  service  at  the  foreign  end  of  the 
journey,  such  as  handling  the  goods  thru  to  the  point 
of  inland  destination.  In  that  case  the  forwarder's 
correspondent  assumes  the  duties  which  would  other- 
wise have  to  be  performed  by  customs  brokers.  For 
these  services  the  forwarder  usually  charges  the  con- 
signee unless  the  seller  chooses  to  assume  the  cost. 
The  forwarding  house  usually  ships  in  its  own  name 
to  avoid  the  necessity  of  asking  for  power  of  attorney 
in  making  oath  before  the  consul.  The  forwarder 
also  attends  to  the  collecting  of  the  seller's  money. 
The  seller  draws  on  the  forwarder,  attaching  to  his 
draft  the  railroad  bill  of  lading.  The  latter  hon- 
ors the  draft,  gets  the  goods,  puts  them  aboard  a 
ship,  and  draws  on  the  foreign  buyer  for  a  sum  equal 
to  the  seller's  draft  plus  the  value  of  the  forwarder's 
service. 

13.  Steamship  agents, — Besides  the  forwarders, 
the  steamship  agents  are  important  in  handling  export 
freight.  Almost  all  the  great  steamship  lines  plying 
to  our  ports  are  represented  in  the  great  inland  centers 
whence  much  of  the  cargo  originates.  Thus,  the 
International  Mercantile  Marine  Companj^  has  a 
general  western  freight  agent  at  Chicago,  a  north- 
western agent  at  Minneapolis,  and  a  southwestern 
agent  at  St.  Louis.  These  representatives  solicit 
freight  for  all  direct  services  run  by  their  companies, 
without  favoring  any  single  one  of  the  ports  touched 
by  their  lines. 

14.  Transshipment. — Steamship    lines    solicit    not 


FREIGHT  SERVICE  ^55 

only  freight  destined  for  points  reached  by  their  own 
vessels,  but  also  goods  which  have  to  be  trans- 
shijDped  in  order  to  reach  their  destination.  While 
almost  all  important  seaports  are  reached  by  direct 
steamers  from  some  port  of  the  United  States,  certain 
ports  can  be  more  easily  reached  thru  connecting 
services.  This  involves  transshipment  at  the  terminus 
of  the  direct  line.  Hamburg  and  Liverpool  are  great 
transshipment  centers  for  trade  with  the  outlying 
points  of  the  world.  Thus,  in  the  Australian  trade 
Liverpool  successfully  competes  with  direct  steamers 
from  American  ports.  The  White  Star  Line,  thru 
its  American  service,  collects  freight  to  be  trans- 
shipped at  Liverpool  into  boats  belonging  to  her  Aus- 
tralian service.  It  happens  sometimes  that  it  is 
cheaper  to  send  even  goods  in  this  indirect  way  to  Aus- 
tralia than  by  direct  steamers  plying  to  that  country. 

However,  because  of  the  danger  of  damage  result- 
ing from  the  extra  handling  and  because  of  the  time 
usually  lost,  transshipment  should  be  avoided  when- 
ever possible.  Destinations  such  as  the  Baltic  ports 
or  those  in  the  Levant  may  be  reached  more  expedi- 
tiously by  transshipment  at  Liverpool  or  Hamburg. 
The  advantages  of  this  method  are  due  to  the  infre- 
quency  of  direct  sailings  from  the  United  States  to 
such  ports. 

Besides  the  groups  discussed  here,  many  others  such 
as  warehousemen  and  bankers  should  be  added  to  give 
a  complete  picture  of  the  organism  which  performs 
directly  and  indirectly  the  ocean  freight  service. 

XV— 18 


256  SHIPPING 

REVIEW 

Describe  the  charter  business  and  its  methods  of  operation. 

Where  is  the  chief  charter  market  for  ships? 

Describe  the  operations  of  the  ship-broker,  and  of  the  seaport 
broker. 

Explain  the  operations  of  the  forwarding  business.  Who  are 
the  most  important  factors  in  it? 

Why  are  goods  transshipped  in  many  cases  instead  of  being 
sent  directly  to  their  destination? 


CHAPTER   V 

OCEAN  FREIGHT  RATES 

1.  Charter  and  liner  rates. — Just  as  the  freight 
service  of  the  ocean  carrier  is  divided  into  two  groups, 
i.e.,  charter  traffic  and  hne,  the  charges  for  these 
services  are  classified  accordingly.  As  we  have  seen 
in  the  previous  chapter,  the  methods  of  rate-making 
in  the  charter  traffic  differ  materially  from  those 
employed  in  the  line  traffic.  In  the  following  para- 
gTaphs  we  shall  discuss  the  general  nature  of  ocean 
freight  rates. 

There  are  certain  features  common  to  all  classes  of 
rates  charged  in  water-borne  traffic.  The  first  of 
these  is  the  cheapness  of  water  transportation  as  com- 
pared with  transportation  by  land.  It  has  been  stated 
in  New  York  shipping  circles  that  the  cost  of  trans- 
porting one  ton  of  freight  one  mile  by  water  averages 
only  7/8  of  a  mill,  while  by  rail  the  cost  averages  8.48 
times  as  much,  or  7.4  mills.  It  is  a  peculiar  fact,  that 
it  costs  less  to  ship  coal  from  Cardiff  to  Port  Said 
(3,072  miles)  than  from  the  South  Wales  coal  district 
to  London  (170  miles).  The  freight  charge  on  a 
shipment  of  men's  shoes  from  New  York  to  London 
(3,222  miles)  is  less  than  the  charge  for  carrying  this 
same  freight  from  Chicago  to  New  York  (912  miles) . 

257 


258  SHIPPING 

.2.  Causes  of  low  chai-ges  of  water  transportation. — 
This  cheapness  of  water  transportation  is  largely  due 
to  the  fact  that  the  water  carrier  has  no  expenditures 
for  purchase,  construction  or  maintenance  of  road- 
bed. Technical  improvements,  especially  in  the  con- 
struction of  marine  engines,  and  more  efficient  design- 
ing resulted  in  a  general  decrease  of  freight  rates  up 
to  1902,  and  in  some  cases  up  to  1908.  If  we  keep  in 
mind  the  fact  that  the  service  rendered  by  steamers 
has  improved  during  the  same  period,  the  drop  in 
ocean  rates  on  inward  voyages  from  an  index  number 
of  121.7  in  1884,  to  66.6  in  1903  seems  remarkable 
indeed.  The  decrease  was  less  pronounced  in  the  case 
of  rates  covering  outward  voyages,  but  the  mean  of 
these  two  classes  of  rates  falling  from  116.2  in  1884, 
to  72.8  in  1903,  shows  a  decrease  which  is  far  in  excess 
of  the  decline  of  the  general  price  level  during  the 
same  period.  The  following  table  gives  a  picture  of 
this  rate  development  compared  with  the  changes 
in  the  wholesale  prices  of  the  most  important  com- 
modities. 

This  table  is  the  result  of  a  most  elaborate  investi- 
gation by  the  British  Board  of  Trade  in  1904.  The 
difficulty  in  arriving  at  a  general  ocean  freight  level 
is  easilj''  perceived  if  one  remembers  the  great  variety 
of  articles  comprised  in  ocean  traffic  and  the  large 
number  of  ocean  routes.  The  above-mentioned  in- 
vestigation covered  numerous  articles  imported  into 
Great  Britain  from  IS^orth  America,  southern  Europe, 


FREIGHT  RATES 


259 


OCEAN  RATES  OF  FREIGHT,  INWARD  AND  OUTWARD 

Statement  showing  the  percentage  fluctuations  in  mean  yearly  freight 
rates  between  the  United  Kingdom  and  certain  ports  abroad  during  each 
of  the  years,  1884  to  1903,  as  compared  with  mean  rates  for  the  year  1900. 
The  percentage  fluctuations  in  wholesale  prices  of  commodities  are  added 
for  comparison.     (1900  figure  equals  100  per  cent.) 


OCEAN  FREIGHT  RATES 

Mean  of 
preceding 
columns. 

Index  ;Nunibcr 
of  Wholesale 

Year 

Inward 

Outward 

Prices  of 
Commodities.' 

ms4 

121.7 

106.9 

98.0 

94.6 

107.3 

125.4 

102.8 

104.4 

84.3 

84.8 

81.2 

74.8 

82.8 

81.8 

96.5 

83.7 

•100.0 

69.1 

65.2 

66.6 

110.7 

101.0 

105.0 

105.6 

114.0 

119.2 

110.5 

95.5 

89.3 

82.3 

78.3 

75.7 

76.0 

84.0 

88.9 

91.7 

100.0 

SO. 8 

76.1 

78.9 

116.2 

104.0 

101.5 

100.1 

110.7 

122.3 

106.7 

100.0 

86.8 

88.6 

79-8 

75.3 

79.4 

82.9 

92.7 

87.7 

100.0 

75.0 

70.7 

72.8 

106.1 

ISAt 

99.8 

'I88fi 

94.4 

ms7 

92.2 

IfifiS 

95.3 

:ifi8fl 

97.1 

isfln 

99.5 

hsiii 

101. 1\ 

1892 

96.3 

1893 

94.6 

1894 

90.3 

1895 

86.8 

18{)fi 

83.9' 

1897 

,85.7' 

1898 

88.5 

1899 

89.5 

1900 

100.0 

1901 

95.2 

1902 

94.7 

190.S 

94.4 

1  See  "Report  on  Wholesale  and  Retail  Prices"  (House  of  Commons 
Paper,  No.  331,  of  1903),  p.  34.  The  figures  have  been  converted  to  the 
basis  of  1900  as  the  standard  year. 

the  Indian  Ocean  and  Australasia.  Also  commodi- 
ties exported  from  Great  Britain  to  Canada  and  the 
United  States,  the  North  Sea  and  Baltic  countries, 
southern  Europe,  South  America  and  Australasia. 
The  chart  on  page  260  will  help  to  clarify  the  result  of 
these  investigations : 

Quite  apart  from  the  effect  of  the  European  war 


260 


SHIPPING 


Chart  Showing  the  Percentage  Fluctuations  in  Mean  Yearly 
Freight  Rates  in  Certain  Trades  and  Voyages.  (1900  Figure 
Equals  100  Per  Cent.) 


1884   1886   1888   1890   1892   189i   1896   1898   1900   19021903 


120 


110 


iioo 


S^  90 


80 


70 


60 


120 


110 


100  s 


90^ 


80 


70 


upon  freight  rates,  there  was  before  the  war  such  a 
rise  in  the  general  level  of  ocean  rates  that  little  of  the 
cheapening  has  remained  permanent.  This  is  evident 
from  the  chart  opposite,  taken  from  appendix  16  of 
"British  Shipping,  its  History,  Organization  and 
Importance,"  by  Kirkcaldy. 

These  figures  refer  to  British  freight  rates  only,  but 
this  does  not  lessen  their  value  as  illustrations  of  the 
universal  rate  level,  because  of  the  dominant  position 
which  Great  Britain  holds  in  the  carrying  trade  of  the 
world,  and  also  because  Great  Britain  draws  her  sup- 
plies from  practically  every  corner  of  the  globe. 

3.  Rate  fluctuation. — These   charts,   representing 


FLUCTUATIONS 

IN  MEAN  YEARLY  FREIGHT  RATES  1884-1912 

:)aoo  J3d[  §S8SSSSS 

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}uao.iDj§            S             1            8            S            e            S             S 

>ote-Duriug  the  year  1913,  mean  homeward,  freights  dropped  to  S 

261 


Mean,  outward  freights  drojped  to  91. 


262  SHIPPING 

as  they  do  general  means,  reflect  only  imperfectly  the 
wide  range  of  fluctuations  which  are  the  second  char- 
acteristic of  ocean  rates  to  be  discussed.  The  general 
freight  level  shows  only  the  effect  of  great  events  such 
as  the  British  Engineers'  strike  of  1897,  the  Spanish- 
American  war,  the  South  African  war,  and  so  forth. 
The  high  rates  of  1898-9  set  shipbuilding  yards  fever- 
ishly busy.  In  1900,  the  new  tonnage  flooded  the 
market  and  its  effect  was  accentuated  by  the  release  of 
ships  chartered  by  the  British  government  in  the  Boer 
war.  Hence  the  depression  after  1900.  The  large 
increase  in  freight  rates  since  1908,  particularly  since 
1911,  is  due  to  various  strikes  such  as  the  British  coal 
strike  of  1911,  to  the  closure  of  the  Dardanelles  dur- 
ing the  Balkan  wars  with  its  effect  upon  insurance 
rates,  and  particularly  to  the  abstention  on  the  part  of 
British  shipbuilders  during  the  preceding  period  of 
depression. 

4.  Conditions  affecting  rates. — The  nature  of  the 
charter  traflic  causes  the  rates  to  fluctuate  more  widely 
than  hne  rates.  Sometimes  within  a  week  or  two  the 
charter  rates  in  a  given  direction  will  rise  three  hun- 
dred per  cent.  This  extraordinary  degree  of  fluctua- 
tion is  due  to  the  fact  that  charter  rates  depend  more 
intimately  upon  suppty  and  demand  than  perhaps  any 
other  prices  that  can  be  named.  If  a  shipper  is  bound 
by  contract  to  ship  a  certain  cargo  at  a  certain  date, 
only  the  ships  that  happen  to  be  at  hand  at  that  time 
are  available ;  all  other  ships,  even  those  that  are  only 


FREIGHT  RATES  263 

a  relatively  short  distance  away,  do  not  exist  as  a  pos- 
sible supply.  This  relation  between  the  urgency  of 
making  a  shipment  and  the  impossibility  of  adjusting 
the  supply  of  vessel  tonnage  with  sufficient  prompt- 
ness to  the  existing  demands  makes  the  charter  rate  a 
marginal  rate.  That  is  to  say,  if  the  amount  of 
freight  calling  for  shipment  exceeds  the  amount  of 
vessel  tonnage  offered,  this  excess  freight,  represent- 
ing the  margin,  cannot  be  shipped  at  all.  It  is,  there- 
fore, the  fear  of  the  shipper  of  being  left  altogether 
without  shipping  facilities  that  enables  the  carrier  to 
charge  a  rate  far  in  excess  of  that  which  might  have 
prevailed  only  a  few  days  earlier,  in  the  same  locality, 
when  the  relation  between  the  freight  and  space  was 
a  different  one. 

Just  as  the  urgent  demand  of  the  shipper  for  space 
at  a  given  time  drives  freight  rates  to  abnormal 
heights,  so  the  opposite  is  the  case  when  a  steamer  is 
embarrassed  for  a  cargo.  Here  the  limitations  placed 
on  the  cheapness  of  water  transportation  manifest 
themselves.  The  boat  must  be  filled,  the  operating 
costs  being  the  same  whether  ten  or  ten  thousand  tons 
are  carried.  When,  therefore,  a  steamer  has  been  dis- 
appointed in  its  expectation  of  filling  up,  it  will  take 
freight  for  extremely  low  rates  rather  than  go  out  half 
empty.  It  is  then  said  that  the  boat  offers  "distress 
room."  Such  cases  occur  frequently  in  the  regular 
line  business,  but  are  even  more  common  in  berth 
traffic.     A  carrier  in  his  anxiety  to  fill  space  left 


^64  SHIPPING 

vacant  by  belated  interior  freight,  negotiates  for  "spot 
cargo,"  and  the  shipper,  taking  advantage  of  the  car- 
rier's anxiety,  squeezes  out  a  low  rate. 

5.  Rate  basis  not  cost  of  operation. — It  seems 
natural  that  the  charges  made  by  those  engaged  in  a 
highly  competitive  business  cannot  be  based  primarily 
upon  the  cost  of  the  service  rendered.  Therefore,  in 
shipping,  the  freight  charges  are  only  secondarily 
influenced  by  the  cost  of  operation,  the  distance 
covered  and  the  time  consumed  in  a  given  voyage. 
Sometimes  freight  will  be  carried  at  a  rate  that  does 
not  exceed  the  operating  expenses.  In  other  cases 
the  charges  exacted  from  the  trade  may  seem  exorbi- 
tant, the  carrier  being  able  to  charge  "all  the  traffic 
will  bear." 

The  distance  covered  plays  a  relatively  unimportant 
part  in  the  calculations  of  freight  rates,  of  charter 
rates  in  particular.  The  same  charges  prevail  to 
ports  which  are  hundreds  of  miles  apart.  We  have 
referred  in  a  previous  chapter  to  the  so-called  "range" 
clauses  attached  to  charter  parties,  which  mean  that 
the  same  freight  rates  are  paid  by  the  shipper  whether 
the  vessel  proceeds  to  Le  Havre  or  Hamburg,  when 
bound  for  Europe;  or  to  any  port  between  Baltimore 
and  Boston,  when  destined  for  America.  The  dis- 
tance from  Hamburg  to  Le  Havre  is  41.5  miles. 
Such  a  distance  means  little  when  compared  with 
such  figures  as: 

Hamburg  to  Buenos  Aires 6,630  miles 

Hamburg  to  San  Francisco    14,080  miles 


FREIGHT  RATES  265 

Hamburg  to  Cape  Town    6,495  miles 

Hamburg  to  Bombay    6,640  miles 

Hamburg  to  Yokohama    11,710  miles 

Hamburg  to  Sydney    12,260  miles 

But  even  the  2,62.5  miles  between  Hamburg  and 
Naples  do  not  hinder  the  mail  steamers  from  charging 
the  same  rates  on  general  cargo  to  Bombay,  whether 
the  shipment  originates  at  the  mouth  of  the  Elbe  or 
in  the  south  of  Italy.  Nor  does  it  make  any  dif- 
ference whether  the  shipment  is  destined  to  Suez,  or 
to  Singapore,  5,000  miles  farther.  Mr.  Lawrence  K. 
Sherman,  Vice-President  of  W.  R.  Grace  and  Com- 
pany, described  the  situation  well  when  he  said : 

Ocean  rates  are  not  a  question  of  cost  and  distance.  They 
are  a  question  of  competitiAe  conditions.  The  field  is  wide 
open  and  j'ou  have  to  make  rates  that  will  get  the  business. 

6.  Knot  twie. — Generally  speaking,  the  time  con- 
sumed on  a  given  voyage  depends  upon  the  distance 
covered.  Occasionally,  how^ever,  other  factors,  such 
as  the  lower  speed  required  while  passing  thru  a  canal, 
or  thru  narrow  or  shallow  waterways,  or  calls  at  inter- 
mediate ports  have  a  bearing  upon  the  time  taken  up 
in  covering  a  given  distance.  That  the  time  consumed 
is  a  relatively  small  item  in  rate  calculations  appears 
from  the  following  statement  of  Professor  E.  R. 
Johnson  before  the  Senate  Committee  on  Interoceanic 
Canals: 

I  found  that  for  a  freight  steamer  of  Q^/)  to  10  knots' 
speed,  which  is  the  speed  at  which  most  freight  steamers  are 


^66  SHIPPING 

run,  the  vessel  owner  or  operator  is  10  cents  per  net  regis- 
tered ton  per  day  better  off  for  every  day's  reduction  in  the 
time  of  the  voyage. 

So,  in  the  case  of  a  2,000  ton  steamer  of  this  de- 
scription the  saving  of  one  day,  or  of  about  220  miles, 
would  amount  to  but  $200,  a  relatively  small  item 
when  compared  with  the  total  cost  of  operating  the 
vessel. 

Of  course,  in  the  case  of  high-class  passenger  vessels, 
representing  a  capital  investment  of  millions — some  of 
the  latest  boats  cost  as  much  as  $8,000,000 — the  time 
factor  becomes  much  more  important,  every  day  eat- 
ing up  large  sums  in  interest  and  amortization.  In 
the  case  of  these  boats  every  possible  effort  is  made 
to  reduce  to  a  minimum  the  time  of  port  stays. 

7.  Competition. — Operating  costs,  which  are  only  a 
secondary  consideration  in  the  case  of  tramp  steamers, 
enter  even  less  into  the  question  of  establishing  the 
basis  for  line  rates.  R.  P.  Schwerin,  formerly  Vice- 
President  and  Manager  of  the  Pacific  Mail  Steamship 
Company,  was  most  emphatic  in  his  statement  before 
the  Committee  on  Interoceanic  Canals  that  "a  liner 
has  to  exclude  all  operating  expenses  in  its  passenger 
and  freight  rates"  and  that  "operating  expenses  do  not 
affect  the  charges  of  the  steamship  company  at  all." 
"At  the  end  of  your  voyage  you  simply  figure  your 
earnings  and  expenses  and  this  will  show  whether  you 
come  out  ahead  or  behind."  The  expensive  steamer 
often  competes  with  the  cheap  one,  but  cannot  charge 
more  for  equal  service  if  it  wishes  to  get  the  freight. 


FREIGHT  RATES  267 

A  good  example  is  the  traffic  in  the  Pacific  ocean. 
Here  expensive  American  steamers  compete  with 
Japanese  steamers  which,  besides  being  often  more 
cheaply  built  and  invariably  more  cheaply  operated, 
are  subsidized  bj^  the  Japanese  government.  That 
government  in  turn  assumes  the  right  to  regulate  all 
inward  and  outward  rates  on  the  products  of  Japan. 
It  regulates  the  sailing  dates  and  routes  of  subsidized 
boats  and  the  rates  which  these  boats  may  charge  for 
export  and  import  cargo,  being  guided  mainly  by  the 
desire  to  build  up  the  foreign  trade  of  that  country. 
All  other  boats  which  compete  with  these  Japanese 
lines  have  to  adjust  their  rate  charges  to  the  standard 
set  by  the  Japanese  government.  Thus,  the  factor  of 
competition  wholly  overshadows  any  regard  for  oper- 
ating expenses  in  the  determination  of  rates.  Natm*- 
ally,  the  desire  to  come  out  ahead  being  the  prime 
consideration  in  the  steamship  business,  as  in  all 
business,  the  general  average  of  rates  charged  cannot 
for  any  length  of  time  fall  below  the  minimum  set  by 
the  operating  expenses;  but  in  the  individual  case 
other  factors  are  of  more  importance  in  the  setting  of 
rates. 

8.  JLoad  factors. — In  its  effect  upon  the  rate  level, 
the  load  factor  is  almost  as  important  as  competition. 
The  question  whether  a  vessel  can  secure  a  full  load 
both  ways  of  a  voyage  is  one  which  affects  rates  very 
much  more  than  time  or  distance.  A  vessel  will 
operate  at  maximum  efficiency  and  at  the  lowest  cost 
per  unit  of  cargo  if  it  can  secure  a  full  cargo  each  way 


268  SHIPPING 

on  every  trip.  The  load  factor  may  fall  short  of  this 
ideal  in  two  general  ways;  there  may  be  enough 
freight  in  one  direction  to  furnish  full  loads,  but  not 
enough  in  the  opposite  direction  to  furnish  more  than 
partial  loads,  or  the  freight  may  be  offered  so  irregu- 
larly in  either  direction  or  in  both  directions  that  the 
loads  vary  thruout  the  season.  The  latter  condition 
will  affect  liners  more  than  tramps,  as  the  latter  ves- 
sels can  always  leave  a  "trade"  as  soon  as  it  ceases 
to  furnish  paying  employment. 

9.  British  coal  exports  and  wo?'ld  charter  rate. — 
Almost  the  entire  British  foreign  trade  in  coal,  apart 
from  that  portion  which  moves  to  adjacent  Conti- 
nental ports,  must  be  viewed  in  place  of  ballast  as  a 
return  freight  proposition.  If  it  were  not  for  tlie 
British  coal  exports  the  tonnage  balance  of  northwest- 
ern Europe  would  be  a  passive  one;  i.e.,  the  amount  of 
imports  going  to  northwestern  Europe  would  far 
exceed  the  amount  of  the  exports.  This  discrepancy'' 
would  be  even  greater,  for  the  reason  that  the  different 
nature  of  the  exports  and  imports  calls  primarily 
for  line  tonnage  outward  and  for  tramps  to  carry 
imports.  The  British  coal  exports,  changing  this 
passive  tonnage  balance  into  an  active  one,  solve  the 
problem  admirably.  The  hundreds  of  tramps  which 
are  employed  bringing  grain,  nitrate,  ore  and  other 
bulky  commodities  to  London,  Rotterdam,  Hamburg 
and  many  other  ports  in  that  part  of  the  world  would 
have  to  go  out  empty  if  it  were  not  for  the  British, 


FREIGHT  RATES  269 

and  in  recent  years  to  a  very  much  smaller  extent, 
the  German  export  of  coal. 

As  it  is,  the  steamer  which  has  just  discharged  a 
cargo  of  Indian  jute  at  Hamburg,  and  which  has  been 
engaged  to  call  for  a  cargo  of  Argentina  wheat  at 
Rosario,  can  always  rely  on  an  outward  cargo  of 
British  coal.  The  coal  is  carried  as  a  ballast  cargo. 
The  transportation  of  coal  is  therefore  largely  a  mere 
side  issue  of  the  shipping  business.  This  is  clearly 
reflected  in  the  freight  rates  charged  for  the  carriage 
of  coal.  The  grain  exports  of  Argentina  may  again 
serve  as  an  illustration.  During  summer  months  in 
the  North,  when  grain  shipments  from  the  southern 
hemisphere  are  dull,  the  rate  on  coal  from  Cardiff  to 
Buenos  Aires  is  fairly  high.  But  as  the  harvest 
proceeds,  and  Argentina  grain  shipments  grow  in 
volume,  the  coal  rate  will  drop  almost  as  much  as  the 
grain  rate  will  rise.  The  following  table  serves  to 
illustrate  this.  It  covers  onty  that  half  of  the  year 
when  grain  shipments  from  Argentina  are  relatively 
small.  When  the  season  is  in  full  swing,  ships  from 
all  parts  of  the  globe  flock  to  Argentina,  so  that  the 
reflex  action  of  the  coal  and  grain  trade  on  each  other 
does  not  then  appear  so  evident. 

10.  United  States  coal  exports, — It  has  been  sug- 
gested that  this  country  should  imitate  the  example  of 
England  in  building  up  a  coal  export  trade  which 
reaches  almost  every  corner  of  the  earth.  Before  the 
House  Committee  on  JNIerchant  JNIarine  and  Fisheries, 


270 


SHIPPING 


Wheat  Freight 

Coal  Freight 

Wheat  Freight 

Coal  Freight 

Date 

La  Plata  to 

Cardiff  to 

Date 

La  Plata  to 

Cardiff  to 

Europe 

La  Plata 

Europe 

La  Plata 

1910 

s.            d. 

S.            d. 

s.          d. 

s.          d.   ■ 

July 

3 

13            6 

13             3 

October.      2 

16             6 

10             6 

10 

11             6 

12        1034 

9 

16             6 

10             6 

17 

10            6 

13             9 

16 

16            — 

10           — 

24 

9             6 

13            6 

23 

17            — 

10           — 

31 

7'           ^ 

—           — 

30 

16             6 

9             6 

August 

7 

10            6 

—           — 

November  6 

15           ,— 

9           — 

14 

13            — 

12             6 

"13 

15            — 

8            — 

21 

15           — 

12           — 

20 

17            — 

8             3 

28 

17           — 

12           — 

27 

17            6 

7             1 

September  i 

18            — 

11           — 

December    4 

17             6 

8             — 

11 

16             6 

11           ^ 

11 

18            _ 

8            — 

18 

16            6 

11           _ 

18 

18             6 

7             6 

25 

16             6 

10            6 

— 

—           — 

—           — 

^  "Die  britische  Kohlenausfuhr"  Essen  1911,  Erich  W.  Zimmerman. 

during  the  recent  hearings  concerning  the  creation  of 
a  shipping  board,  a  proposal  was  made  for  the  devel- 
opment of  American  coal  exports  to  Argentina. 
At  once  the  difficulty  presented  itself  that  little  or  no 
freight  could  be  taken  back.  Meat  from  La  Plata 
can  not  use  the  same  boats  that  cany  coal.  It  re- 
quires better  quarters.  Coal  could  be  carried  in  the 
boats  bringing  hides,  wool  and  corn,  but  south-bound 
these  boats  are  alreadj^  more  than  filled  with  general 
cargo  from  the  United  States.  With  this  in  view,  a 
triangular  voyage  was  suggested;  American  coal  to 
Argentina,  Argentina  grain  to  England  and — here 
was  the  difficulty — in  ballast  from  England  back  to 
the  United  States.  Perhaps  in  the  future  this  coun- 
try will  have  to  supplement  its  own  wheat  production 
by  imports  from  younger  countries  like  Argentina. 

11.  Triangular  voyages. — The  discrepancy  in  the 
volume  of  commodities  moving  over  the  same  route 


FREIGHT  RATES  271 

but  in  opposite  directions,  as  illustrated  by  the  figures 
given  above  to  show  the  relative  weight  of  exports 
and  imports  of  the  United  States,  often  makes  it 
necessary  to  arrange  so-called  triangular  voyages. 
The  ships  of  the  United  States  Steel  Products  Com- 
pany, already  described,  installed  in  the  Vancouver 
service,  take  as  a  return  cargo  lumber  or  copper  matte 
for  Dunkirk,  France,  and  in  France  they  take  on 
chalk  for  New  York.  This  triangular  voyage  occu- 
pies from  seven  to  eight  months. 

12.  MiiVed  cargo  as  a  rate-making  factor. — An  im- 
portant consideration  which  affects  the  rate  policy  of  a 
steamship  line  is  the  desire  to  secure  a  load  which  uses 
the  ship's  space  with  maximum  economy.  We  have 
seen  that  a  mixed  cargo  is  better  than  a  homogeneous 
one.  Among  the  manifold  classes  of  general  freight 
are  some  which  "weigh  more  than  they  measure," 
others  which  "measure  more  than  they  weigh."  The 
steamship  line  wishes  to  have  a  certain  proportion  of 
these  two  classes  so  as  to  be  able  to  fill  the  ship 
economically.  It  uses  its  rate  policy  to  bring  about 
this  effect.  R.  P.  Schwerin,  in  his  testimony  before 
the  Senate  Committee  on  Interoceanic  Canals,  re- 
ferred to  this  when  he  said: 

Naturally  we  would  go  after  the  package  or  best  paying 
class  of  freight  first  and  estabHsh  a  service  of  volume  and 
regularity  that  would  take  care  of  all  the  freight  offering; 
we  would  hold  up  our  rates  as  high  as  consistent  with  the 
filling  of  our  ships  with  the  class  of  cargo  that  we  wanted 
and  at  times  reduce  it  to  induce  movement  of  tonnage  in 
case  there  was  a  shortage.     If  too  much  freight  were  offer- 

XV— 19 


272  SHIPPING 

ing  we  might  raise  the  rate  on  iron  in  order  to  take  a  larger 
portion  of  general  merchandise.  If  general  merchandise 
were  not  offering  we  might  lower  the  rate  on  iron  to  fill  the 
ship.     This  is  the  general  policy  pursued. 

The  following  table  prepared  by  H.  A.  Boas  of  the 
New  York  office  of  the  Hamburg- American  Line, 
illustrates  how  to  fill  a  vessel  with  two  classes  of  cargo 
so  that  she  is  full  and  down  to  her  marks : 

Vessel  5,000  tons  freight-carrying  capacity ; 

275,000  cubic  ft.  freight-carrying  capacity. 

To  fill  with  copper  measuring  9  cubic  feet  to  the  ton  and  lum- 
ber measuring  on  an  average  100  cubic  feet  to  the  ton. 
Let  X  equal  weight  of  copper 
Let  Y  equal  weight  of  lumber 

X  plus  Y  equals  5,000 

9X  plus  lOOY  equals  275,000 

9X  plus  9Y  equals  45,000 

9X  equals  45,000— 9 Y 

45,000— 9Y  plus  lOOY  equals  175,000 

91Y  equals  230,000 

Y  equals  2,527.5 

X  equals  ^,472.5 

2,472.5  tons  of  copper  equals    22,152.5  cubic  feet 

2,527.5  tons  of  lumber  equals  252,750.     cubic  feet 

274,902.5  cubic  feet 
275,000  equals  total  frt.  room 

13.  Rate  quotations. — As  the  variety  of  commodi- 
ties carried  by  steamships  grew,  it  became  desirable 
to  improve  the  original  and  unscientific  methods  of 
quoting  rates  for  each  single  article. 

A  nmnber  of  causes  have  led  to  this  change.  One 
of  them  was  the  competition  of  railroad-owned  steam- 


FREIGHT  RATES  273 

ship  lines,  which  naturaly  applied  the  scientific  rate- 
making  practiced  in  their  inland  service  water-borne 
traffic.  Another  cause  was  the  increase  in  com- 
petition among  shipping  companies,  who  vied  with 
each  other  to  conquer  the  rich  transatlantic  trade 
with  this  countiy.  This  struggle  led  them  to  quote 
their  rates  in  a  manner  familiar  to,  and  therefore  more 
easily  understood  by  the  American  public. 

However,  as  yet  the  classifications  that  have  been 
introduced  are  rather  broad  and  imperfect.  No  uni- 
formity exists  as  yet.  Such  tariffs  as  exist  in  the  New 
York  trade,  governing  shipments  to  Europe,  South 
Africa,  Australia,  New  Zealand,  China,  Japan  and 
the  Orient  generally,  or  to  Brazil  and  the  River 
Plata,  "are  jealously  kept  back  of  the  counters  of  the 
steamship  companies."  It  is  a  question  whether  the 
present  chaos  will  ever  be  replaced  by  as  complete  a 
system  as  governs  railroad  traffic,  but  surely  great 
improvements  may  be  hoped  for  in  the  future. 

14.  Effect  of  tramps  on  line  rates. — Tramps  affect 
line  rates  in  a  twofold  way,  as  there  are  two  cases 
where  their  services  meet.  One  case  is  when  the  liner, 
in  order  to  fill  space,  carries  bulk  goods  such  as  grain 
and  ore,  which  are  the  natural  tramp  cargoes.  The 
other  case  is  the  reverse  and  arises  when  the  tramp  is 
"put  on  the  berth"  to  compete  with  line  space  for 
general  merchandise.  Such  competition  is  lessened 
by  the  method  of  granting  deferred  rebates,  by  which 
lines  tie  the  shipper  permanently  to  themselves,  a 
practice  to  be  discussed  later.    It  is  illustrated  by  the 


274  SHIPPING 

agreements  which  the  raih'oads  serving  the  ports  of 
the  Atlantic  seaboard  have  with  the  steamship  lines. 
New  York  and  New  Orleans  are  free  from  such  rail- 
road agreements,  and  therefore  in  them  the  competi- 
tion of  the  tramp  and  the  liner  is  stronger. 

One  of  the  most  vital  questions  in  regard  to  rate- 
making  is  the  difficult  task  of  determining  what  con- 
stitutes a  "reasonable  rate."  This  involves,  accord- 
ing to  Professor  S.  S.  Huebner,  a  study  of: 

(a)  The  factors  that  influence  the  rise  and  fall  of  the 
general  level  of  rates. 

(b)  The  difference  in  the  nature  of  the  service  rendered 
by  liners  and  tramps. 

(c)  The  character  of  the  vessel  and  the  expenslveness  of 
operating. 

(d)  The  stability  of  rates  over  a  long  period  of  time, 
charter  rates  fluctuating  much  more  violentl}^ 

(e)  The  diff^erent  conditions  surrounding  each  trade  route 
as  regards  the  nature  of  the  service,  the  quantity  of  the 
cargo,  and  the  opportunity  for  eff'ecting  combination  car- 
goes. 

(f)  What  constitutes  a  fair  profit  to  the  line,  all  factors 
considered. 

15.  Rates  and  the  European  *war. — The  effect  of 
the  European  war  on  ocean  rates  offers  a  most  inter- 
esting study  in  so  far  as  it  illustrates,  as  no  event  of 
past  history  ever  did,  the  extent  to  which  rates  are 
influenced  by  the  law  of  supply  and  demand.  But 
after  all,  the  conditions  which  now  are  completely 
thro^vn  out  of  their  usual  order  into  a  state  of  chaos 
will  return  to  a  normal  state  of  affairs,  proving  the 
temporary  nature  of  the  present  situation.     And  we 


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276  SHIPPING 

are  here  concerned  not  with  temporary  conditions,  but 
with  the  underlying  principles,  the  gi-eat  laws  that 
govern  shipping  in  normal  times. 

However,  in  order  to  illustrate  the  effect  of  the  war 
on  ocean  freight  rates,  the  table  on  page  275  is  pre- 
sented. 

REVIEAV 

Describe  the  low  rates  for  ocean  freight  and  the  differences 
between  charter  rates  and  line  rates. 

What  have  been  the  main  directions  in  the  rate  changes  of  re- 
cent years? 

What  causes  temporary  changes  in  rates  at  any  given  time 
and   place  ? 

What  is  the  general  basis  of  freight  rates? 

How  does  the  character  of  the  cargo  in  the  opposite  directions 
affect  the  rates? 

Why  are  triangular  voyages  made? 

Describe  how  the  most  desirable  proportions  of  cargoes  of 
different  merchandise  are  obtained. 


CHAPTER   VI 

STEAMSHIP  AGREEMENTS 

1.  Regulated  versus  wild  competition. — It  has 
already  been  shown  that  the  freedom  of  the  seas  is  the 
fundamental  factor  controlling  and  determining 
ocean  rates.  Statements  such  as  that  of  Mr.  Rufus 
Hardy  before  the  Committee  on  the  Merchant  Marine 
and  Fisheries,  that  "the  day  of  competition  on  the 
ocean  is  gone,  that  combinations  had  taken  its  place, 
that  all  laws  against  combinations  are  futile  in  that 
respect,  and  that  the  time  had  now  come  to  recog- 
nize combination  and  regulate  it,"  should  be  taken 
with  a  grain  of  salt.  It  will  be  shown  that  many 
agreements  do  exist  between  former  rivals,  and  that 
in  rare  cases  competition  has  actually  been  replaced 
by  combination.  But  it  is  also  true  that  competition 
in  rate-making  has  been  replaced  by  competition  in 
service,  and  that  as  yet  no  combination  has  been 
found  strong  enough  to  overcome  the  force  of  com- 
petition innate  in  the  nature  of  shipping.  The  slogan 
is  not  "combination  versus  competition,"  but  "regu- 
lated, versus  wild  competition." 

2.  Government  investigations. — Careful  investiga- 
tions carried  on  by  the  governments  of  both  this  coun- 

277 


278  SHIPPING 

try  and  Great  Britain  have  revealed  the  nature  and  the 
scope  of  almost  all  existing  shipping  rings,  confer- 
ences, pools  and  other  agi'eements.  In  the  United 
States  the  investigation  of  shipping  combinations, 
carried  on  in  1913  by  the  House  Committee  on  the 
Merchant  Marine  and  Fisheries,  showed  that  the  ad- 
vantages of  shipping  combinations  are  greater  than 
their  drawbacks.  It  was  found  that,  contrary  to  pop- 
ular belief,  shipping  combinations  were  not  confined* 
to  American  trade,  but  were  universal  in  their  nature. 
Nor  is  their  aim  necessarily  directed  against  the  inter- 
ests of  the  United  States.  In  an  address  to  the  Na- 
tional Foreign  Trade  Convention  at  Washington, 
June  13,  1914,  Mr.  P.  A.  S.  Frankhn  of  the  Inter- 
national Mercantile  Marine  Company,  said: 

A  fallacy  which  I  should  like  to  expose  here  is  the  con- 
tention that  the  foreign  lines  are  seeking  to  throttle  Ameri- 
can export  trade.  On  the  contrary,  I  am  confident  the  for- 
eign lines  are  doing  everything  possible  to  encourage  our 
trade,  which  it  is,  of  course,  to  their  best  interest  to  do,  even 
to  the  apparent  detriment  of  the  merchants  of  the  foreign 
country  to  which  the  steamers  happen  to  belong,  as  the  ship- 
owner has  to  be  supported  by,  and  make  a  living  out  of,  his 
particular  trade.  If  rates  should  be  unduly  advanced,  the 
foreign  buj^er,  who  pays  the  freight,  would  decline  to  pur- 
chase our  products.  The  safety  valve  against  the  charging 
of  exorbitant  freight  rates  is  in  reality  the  lines'  own  in- 
terest to  do  everything  in  their  power  to  foster  trade,  and  to 
do  nothing  which  would  have  a  tendency  to  restrain  it. 

3.  Tramp  vessel  combinations. — The  government 
investigations  referred  to  above  brought  out  with 
striking  clearness  the  fact  that  no  combination  of  last- 


STEAMSHIP  AGREEMENTS  279 

ing  influence  and  large  scope  can  exist  among  tramp 
vessels.  To  organize  the  numberless  tramps  whose 
ownership  is  scattered  among  hundreds  of  individuals 
and  companies,  is  an  impossibility.  Tramps  are 
quickly  built.  A  broker  will  soon  find  cargoes  and, 
by  shghtly  cutting  the  rate,  the  new  competition  will 
secure  abundant  and  profitable  employment,  leaving 
idle  the  boats  which,  bound  by  their  agreement,  must 
charge  the  higher  rate. 

It  is  not  lack  of  experience  in  cooperation  which 
stands  in  the  way  of  successfully  bringing  together 
owners  of  charter  vessels.  Many  associations  formed 
to  protect  their  mutual  interest  manifest  their  will- 
ingness to  cooperate  and  show  their  possession  of 
the  necessary  esprit  de  corps.  But  every  attempt  to 
control  charter  rates  has  proved  futile,  in  spite  of  the 
strong  feeling  of  solidarity  which  prevails  among  large 
groups  of  tramp  owners. 

4.  Examples  of  charter  vessel  combinations. — 
Several  attempts  have  been  made  at  such  rate  control. 
Whenever  a  serious  depression  befalls  the  shipping 
industiy,  the  desire  to  raise  the  rate  level  to  a  profit- 
able height  by  concerted  action  is  naturally  strong. 
Thus,  the  formation  of  the  "Saihng  Ship  Owners'  In- 
ternational Union,"  with  headquarters  at  London,  was 
largely  a  result  of  the  slump  in  the  general  rate  level 
which  occurred  after  the  extraordinary  boom  caused 
by  the  Boer  war.  A  secondary  factor  was  the  large 
subsidies  which  the  French  goverment,  unlike  other 
governments,  was  granting  to  the  sailing  ship  owners 


280  SHIPPING 

of  that  country.  The  union  was  organized  in  1904, 
and  in  1905  the  tonnage  interest  covered  by  the  union's 
agreement  represented  as  much  as  87  per  cent  of  the 
British,  French  and  German  saihng  tonnage.  Yet  in 
spite  of  this  large  membership,  the  work  of  the  union 
met  with  but  Httle  success. 

The  scope  of  the  union  was  limited,  (1)  to  mini- 
mum rates;  (2)  to  certain  long  voyages;  (3)  to 
voyages  homeward  to  Europe  only;  (4)  to  vessels  of 
certain  size  only;  (5)  to  sailing  vessels  only";  i.e.,  to 
vessels  which  today  do  probably  no  more  than  five  per 
cent  of  the  work  of  ocean  transportation. 

Still  more  restricted  in  the  scope  of  its  activities  is 
the  "Baltic  and  White  Sea  Conference"  which  was 
organized  in  1905  in  Copenhagen.  It  does  not 
attempt  any  rate  control  whatsoever,  but  confines 
itself  completely  to  matters  pertaining  to  uniform 
charter  parties  and  standardization  of  measures. 

The  two  examples  given  are  the  most  conspicuous 
efforts  of  cooperation  among  tramp  owners,  and  even 
they  serve  to  illustrate  the  impossibility  of  efficient 
tramp  organization,  rather  than  the  reverse.  How 
this  large  and  uncontrollable  element  of  charter  vessels 
reacts  upon  the  line  traffic,  was  set  forth  in  the  fore- 
going chapter.  It  represents  a  constant  menace  to, 
and  limitation  of,  any  great  controlling  agreement  and 
conference  of  lines. 

5.  Liner  cooperation. — There  are  many  reasons 
which  render  rate  conti'ol  and  intensive  cooperation 
among  liners  easier  and  more  practicable  than  like 


STEAMSHIP  AGREEMENTS  281 

attempts  in  the  charter  traffic.  The  liner  represents  a 
much  larger  unit  than  the  tramp  vessel;  this  means 
that  the  cost  of  duplication  is  greater.  High-class 
liners  offer  fast  service  and  passenger  accommoda- 
tions; for  this  business  tramps  cannot  come  in  and 
compete.  The  liner  traffic,  furthermore,  shows  a 
greater  concentration  of  ownership;  the  smaller  the 
group  of  men  which  controls  a  certain  trade,  the  more 
easily  can  this  trade  be  efficiently  organized.  Another 
important  consideration  arises  from  the  fact  that  the 
tramp  which  has  demoralized  freight  rates  in  a  given 
trade,  thanks  to  its  freedom  from  route  restriction, 
can  escape  punislmient  by  fleeing  the  scene  of  ac- 
tion, while  the  liner  "must  stay  in  the  water  it  has 
troubled,  and  suffer  the  consequences  of  its  deed." 

Rate  cutting  in  the  liner  traffic  in  most  cases  leads 
to  costly  rate  wars  in  which  both  sides  lose  heavily. 
The  privacy  of  the  individual  negotiation  which  fixes 
the  charter  rate,  as  opposed  to  the  publicity  ruling 
among  liners,  makes  rate  cutting  easier  for  the  tramp. 
But  while  it  is  thus  evident  that  agreements  among 
liners  are  more  easily  made  than  in  the  charter  traffic, 
it  would  be  wrong  to  underestimate  the  difficulties 
confronting  those  who  organize  steamship  line  agree- 
ments. The  limitations  resulting  from  these  difficul- 
ties lie  more  in  the  scope  of  activity  of,  and  the  degree 
of  control  exercised  by,  individual  conferences,  than 
in  the  number  of  existing  agreements. 

6.  Agreements  in  United  States  trade. — The  re- 
port published  by  the  United  States  House  Commit- 


282  SHIPPING 

tee  on  the  IMerchaiit  Marine  and  Fisheries  (February 
1914),  shows  that  it  is  the  ahiiost  universal  practice 
for  steamship  Hnes  engaging  in  the  American  foreign 
trade  to  operate  both  on  the  inbound  and  outbound 
voyages  under  the  terms  of  written  agreements,  con- 
ference arrangements,  or  gentlemen's  understand- 
ings. This  principal  purpose  is  the  regulation  of 
competition  thru  either,  (1)  the  fixing  or  regulation 
of  rates;  (2)  the  apportionment  of  traffic  by  allot- 
ting the  ports  of  sailing,  restricting  the  number  of  sail- 
ings, or  limiting  the  volume  which  certain  lines  may 
carry;  (3)  the  pooling  of  earnings  from  all  or  a  por- 
tion of  the  traffic ;  or  ( 4 )  meeting  the  competition  of 
non-conference  lines.  It  was  found  that  eighty  such 
agreements  or  understandings,  involving  practically 
all  the  regular  steamship  lines  operating  on  nearly 
every  American  or  foreign  trade  route,  were  in  ex- 
istence. It  would  be  wrong,  however,  to  assmne  that 
in  the  case  of  the  foreign  trade  of  this  country  agree- 
ments are  more  numerous  or  more  noticeable  than  in 
other  parts  of  the  world.  As  a  matter  of  fact,  long 
voyages  furnish  a  better  field  than  the  transatlantic 
trade  for  the  establishment  of  rate-controlling  com- 
binations. Long  voyage  trades  are  usually  more  ex- 
pensive and  require  less  frequent  sailings,  thereby 
reducing  the  number  of  participants  in  the  service. 
So  it  is  only  natural  to  find  shipping  trusts,  rings  and 
conferences  more  firmly  established,  and  in  larger 
numbers,  in  the  trade  with  the  Antipodes  than  in  the 
transatlantic  traffic. 


STEAMSHIP  AGREEMENTS  283 

9.  Important  ship  combinations  in  United  States. — 
The  following  are  the  most  imj)ortant  combinations  of 
ocean  carriers  operating  to  and  from  ports  in  the  Uni- 
ted States,  whose  existence  was  revealed  by  evidence 
produced  before  the  Committee  referred  to  above: 

(1)  The  North  Atlantic  Freight  Association,  com- 
posed of  the  Allan  Line,  American  Line,  Anchor 
Line,  Canadian  Pacific- Atlantic  Coast  Lines,  Cunard 
Line,  Dominion  Line,  Donaldson  Line,  Canadian 
Northern   (Royal  Line)    and  the  White  Star  Line; 

(2)  Agreements  as  to  North  Atlantic  passenger 
traffic  include,  in  addition  to  the  lines  just  named,  the 
Hamburg  American  Line,  the  North  German  Lloyd, 
and  the  Red  Star  Line;  (3)  The  Baltic  Pool,  com- 
posed of  the  Wilson  Line,  the  Hamburg  American 
Line,  the  North  German  Lloyd,  and  the  Scandi- 
navian-American line. 

The  trade  between  the  United  States  and  India  is 
controlled  largely  by  a  conference  between  the  Hansa 
Line  and  the  American-Indian  Line.  The  Japanese 
conference  included  the  Pacific  Mail,  the  Canadian 
Pacific  Line,  the  China  Mutual,  the  Great  Northern, 
the  Bank  Line,  the  Ocean  Steamship  company  and 
three  Japanese  lines — the  Nippon  Yusen  Kaisha,  the 
Osaka  Shosen  Kaisha,  and  the  Toyo  Kisen  Kaisha. 

8.  South  American  trade. — The  trade  with  South 
America  is  controlled  largely  by  two  conferences 
managing  the  lines  plying  to  ports  of  the  east  Coast ; 
the  American  Brazilian  Conference,  and  that  covering 
the  River  Plata  service.     The  former  includes  the 


284  SHIPPING 

Prince,  the  Lamport  and  Holt,  the  Hamburg- Ameri- 
can Line  and  the  Hamburg-South  American  Com- 
pany. The  latter  consists  of  the  Prince,  Lamport 
and  Holt,  the  Houston,  the  Barber  and  the  Ameri- 
can-Rio Plata  lines.  The  west  coast  of  South  Amer- 
ica is  not  controlled  by  a  conference;  however,  rates 
in  that  trade  are  maintained,  altho  no  definite  agree- 
ment exists. 

The  Royal  JNIail,  the  Hamburg- American,  Atlas, 
and  the  Royal  Dutch  West  India  Mail,  operate  the 
trade  with  Jamaica  under  an  agreement  to  which  the 
United  Fruit  Company  tacitly  adheres. 

In  the  trade  of  the  Caribbean  Sea,  the  Royal  Mail  Steam 
Packet  Company  and  the  Hamburg-American  Atlas  Line 
have  a  pooling  arrangement  both  as  to  freight  and  passen- 
gers, while  the  United  Fruit  Company,  tho  not  a  party 
to  the  agreement,  maintains  the  other  companies'  rates,  as 
does  the  Government's  Panama  Steamship  Line  so  far  as 
trade  with  the  Isthmus  is  concerned. 

An  agreement  between  the  Union-Castle,  Bucknall, 
Clan,  Hansa,  Houston,  and  Prince  Lines,  governs  the 
business  between  New  York  and  South  Africa. 
Finally,  the  Australian  trade  is  carried  on  by  agree- 
ment between  the  L^nited  Tyser,  American  and  Aus- 
tralasian, United  States  and  Australasian,  and  White 
Star  Lines. 

9.  Conferences  and  pools. — The  combinations  ex- 
isting between  shipping  lines  may  be  divided  into  two 
distinct  groups — conferences  and  pools.  Of  these 
the  jDool  is  the  higher  form  of  development.    While  a 


STEAMSHIP  AGREEMENTS  285 

conference  can  exist  without  a  pool,  a  pool  cannot 
exist  without  a  conference.  A  conference  may  be 
merely  a  "gentlemen's  agreement"  calling  only  for 
occasional  meetings  of  the  interested  managers,  to 
discuss  questions  of  administration,  forms  of  bills  of 
lading,  methods  of  receiving  and  delivering  cargo,  etc. 
In  other  cases,  however,  the  agreement  is  based  upon  a 
firmly  binding  contract,  which  is  executed  in  writing, 
signed  and  sealed,  "visiting  severe  penalties  on  any 
of  the  heavily  bonded  signers  who  may  violate  its 
terms." 

The  pool  is  merely  a  corollary  of  the  conference. 
PooHng,  when  applied  to  steamship  lines,  involves  the 
payment  of  some  part  of  the  freight  or  passage  money 
into  a  common  fund.  This  fund  is  later  divided 
among  the  partners,  according  to  a  scale  agreed  upon. 
The  pool  does  not  necessarily  kill  the  desire  of  the 
member  line  to  carry  as  large  a  portion  of  a  given 
trade  as  possible,  but  it  usually  obviates  the  scramble 
for  a  most  favorable  position,  which  often  leads  to 
irregularity  as  to  sailing  dates,  ports  of  call,  etc. 
Should  a  pool  member  not  carry  his  share  of  the  joint 
tonnage  without  aid,  he  would  have  his  quota  of  the 
earnings  of  the  pool  reduced. 

10.  Administration  of  pools. — The  form  and  ad- 
ministration of  pools  differ  materially  according  to 
the  various  kinds  of  trades.  In  its  simplest  form  the 
pool  has  to  do  with  merely  one,  two  or  several  articles 
of  the  cargo  carried.  In  its  more  elaborate  forms 
the  pool  not  only  divides  the  money  received  for  the 


286  SHIPPING 

carriage  of  freight  or  passengers,  but  also  the  traffic 
itself,  so  that  a  reasonable  relation  is  brought  about 
between  pooled  earnings  and  service  performed.  Un- 
der such  circumstances  the  j)ool  works  with  consid- 
erable fairness,  especially  when  the  cost  of  operating 
the  individual  steamer  is  also  taken  into  considera- 
tion. 

11.  Immigrant  traffic  pools. — The  most  powerful 
pools  were  those  established  in  the  transatlantic  im- 
migrant traffic.  This  is  the  most  desirable  portion  of 
the  trade  between  America  and  Europe.  Here  the 
North  German  Lloyd  and  the  Hamburg-American 
Line,  for  instance,  divided  the  steerage  traffic  into  al- 
most equal  portions,  the  North  German  Lloyd  re- 
ceiving 53  per  cent  and  the  Hamburg- American  Line 
47  per  cent  of  the  total  handled  by  the  two  lines.  By 
so-called  "control  stations"  the  Russian  and  Austrian 
borders  are  effectively  controlled  and  the  immigrant 
traffic  is  segregated  in  groups  for  Bremen  and  Ham- 
burg in  accordance  with  the  pool  agreement.  Other 
pools  involve  freight  earnings,  and  still  others  cover 
cabin  and  steerage  traffic. 

12.  Conference  advantages  to  shippers. — The  ad- 
vantages and  disadvantages  of  steamship  conferences, 
as  seen  from  the  viewpoint  of  both  the  ship-owner  and 
the  shipper,  have  been  carefully  analyzed  by  the  ex- 
pert adviser  of  the  United  States  House  Committee 
on  the  Merchant  Marine  and  Fisheries,  t'rofessor  S. 
S.  Huebner.  We  shall  give  here  merely  a  short  sum- 
mary of  Professor  Huebner's  statement : 


STEAMSHIP  AGREEMENTS  287 

Agreements  are  said  to  have  resulted  in  improving 
the  service  rendered  by  the  steamship  hnes.  These 
improvements  consist  mainly  in  greater  regularity  and 
increased  number  of  sailings  and  in  the  instalment  of 
faster  and  safer  vessels.  Greater  regularity  brings 
to  the  shij)per  several  advantages ;  he  needs  less  stock, 
does  not  have  to  engage  cargo  space  long  in  advance 
and  can  enter  forward  contracts  for  the  delivery  of 
his  goods  at  a  definite  date.  The  greater  speed  and 
safety  of  the  vessels  bring  lower  insurance  rates  and 
reduce  the  loss  of  interest  on  the  cargo  while  in  transit. 

Stability  of  rates  over  long  periods  of  time  is  the 
next  favorable  result  of  steamship  conferences.  The 
speculative  risk  which  exists  under  the  system  of  open 
competition  is  eliminated.  It  enables  the  shipper  and 
merchant  to  calculate  to  a  nicety  this  element  of  cost. 
Three  factors  assure  the  shipper  reasonable  rates:  (a) 
lines  can  not  afford  to  charge  rates  detrimental  to 
the  development  of  the  traffic;  (b)  competition  of 
lines  serving  the  European  merchant  between  the 
same  ports  to  which  American  shippers  trade,  serves 
as  a  constant  check  on  rates  from  America;  (c) 
tramp  competition  holds  down  liner  rates. 

13.  Rate  charges  and  rate  wars. — It  is  further 
claimed  that  the  conference  establishes  uniform  rate 
charges,  the  small  shipper  being  treated  in  the  same 
way  as  the  big  one.  Under  the  system  of  open  com- 
petition the  powerful  shipper  could  play  one  line 
against  the  other  and  thereby  obtain  preferential 
rates.     The  conference,  on  the  other  hand,  has  no  spe- 

XV— 20  -  ^ 


288  SHIPPING 

cial  interest  in  showing  favors  to  big  shippers,  espe- 
cially in  cases  in  which  earnings  are  pooled  irrespec- 
tive of  the  amount  of  business  done  by  each  line. 

The  rate  wars  common  under  open  competition 
often  result  in  the  survival  of  the  strongest  and  in  the 
elimination  of  the  weak  lines;  but  agreements,  par- 
ticularly pools,  tend  to  compensate  weaker  members 
for  their  inability  to  obtain  a  large  portion  of  the  more 
remunerative  trade. 

One  of  the  most  important  advantages  of  the  con- 
ference system  is  the  fact  that  rates  from  the  United 
States  to  a  foreign  port  are  maintained  on  a  parity 
with  the  rates  from  other  countries.  For  example, 
in  normal  times  rates  from  New  York  to  Rio  are  the 
same  as  those  from  Hamburg  or  Liverpool  to  Rio. 
This  is  the  more  remarkable  in  view  of  the  fact  that 
the  European  trade  is  said  to  be  considerably  more 
valuable  to  the  lines  than  the  American  trade,  because 
the  former  contains  a  larger  portion  of  high-class 
package  freight  and  affords  better  opportunities  to 
obtain  retui'n  cargoes. 

14.  General  advantages. — While  the  standard  of 
service  rendered  by  the  conference  lines  has  improved, 
certain  reductions  in  the  cost  of  service,  made  pos- 
sible by  the  conference,  are  said  to  result  in  an  ulti- 
mate reduction  of  freight  rates.  Wasteful  competi- 
tion is  eliminated,  and  the  aggregate  cost  of  the  serv- 
ice rendered  by  all  the  lines  is  accordingly  reduced. 
Furthermore,  the  cost  of  service  can  be  more  econom- 
ically distributed  so  as  to  develop  the  trade.     Rates 


STEAMSHIP  AGREEMENTS  289 

may  be  reduced  on  certain  articles,  compensation  be- 
ing found  in  increasing  the  rate  on  other  items.  Lines 
can  view  the  trade  "not  only  as  it  is,  but  also  as  it  may 
become."  Ports  can  be  developed  which  otherwise 
would  be  neglected. 

Judge  Alexander,  who  presided  over  the  Shipping 
Investigation,  summed  up  the  situation  in  a  recent 
report  with  the  words: 

Steamship  line  representatives,  as  well  as  the  patrons  of 
the  lines  were  almost  a  unit  in  emphasizing  to  the  committee 
the  importance  and  necessity  of  the  aforementioned  advan- 
tages of  agreements  and  conferences. 

In  fact,  it  was  openly  claimed  that  these  advantages 
far  outweighed  the  following  disadvantages. 

In  the  first  place,  the  monopolistic  nature  of  the 
steamship-line  combinations  is  attacked.  It  is  said 
that  all  combinations  of  private  enterprises  containing 
the  germ  of  monopoly  are  apt  to  abuse  their  power  to 
the  detriment  of  the  public ;  the  primary  aim  of  confer- 
ences being  to  prevent  the  establishment  of  other  lines 
in  a  given  trade.  In  so  far  as  "fighting  ships"  are 
used  for  the  accomplishment  of  this  aim,  the  shippers' 
contention  finds  support  in  the  courts.  These  fight- 
ing ships  are  sent  by  the  combination  to  take  away 
the  business  of  an  uncontrollable  competitor.  They 
dock  next  to  the  competitor's  ship  and  take  freight  at 
a  lower  rate  than  he  could  afford  to  grant.  AVhen  the 
United  States  brought  suit  against  the  Hamburg- 
American  Line  and  other  foreign  steamship  lines,  at- 
tempting to  "break  up  an  alleged  combination  of 


290  SHIPPING 

European  ship-owning  lines,"  the  court  refused  to 
grant  the  principal  relief  asked  for  by  the  govern- 
ment, but  granted  a  relief  against  fighting  ships. 

15.  Shippers  ohjectiofis  to  combinations. — The 
fear  is  expressed  that  altho  the  monopoly  of  the  lines 
may  be  limited  at  present,  the  combinations  will  be- 
come more  powerful  in  the  future  and  will  gradually 
gain  complete  control  over  their  specific  area. 

Shippers  further  object  to  the  secrecy  of  most 
steamship  agreements,  especially  to  the  refusal  of  the 
lines  to  publish  their  rates  and  tariffs.^ 

In  some  cases  it  is  claimed  the  lines  have  arbitrarily 
increased  rates  without  giving  the  shipper  due  notice 
in  advance.  Shippers  also  argue  that  not  all  lines 
adhere  to  the  principle  of  treating  all  shippers  alike. 

Strong  opposition  is  voiced  against  the  deferred 
rebate  system.  Under  this  system  the  line  agrees  to 
refund  to  the  "loyal  shipper,"  i.e.,  the  shipper  who 
patronizes  the  line  exclusive^  with  all  his  shipments 
in  a  given  direction,  a  certain  portion  of  the  freight 
charges,  usually  five  to  ten  per  cent.  This  rebate  is 
paid  after  periods  of  considerable  length,  in  some 
cases  as  long  as  twelve  months,  and  is  called  a  "de- 
ferred rebate."  The  system  has  been  practically  done 
away  with,  as  far  as  the  outward  American  trade  ^  is 

1  In  Canada,  the  Railway  Act  compels  any  railroad  which  "owns 
charters,  uses,  maintains  or  works,  or  is  a  party  to  any  arranging  for 
using,  maintaining  or  working  vessels  for  carrying  traffic  by  sea  or  by 
inland  water"  to  file  its  tariifs  with  the  Board  of  Railway  Commis- 
sioners. 

-  In  1913  the  Steamship  Conference  advised  Sir  Harry  Drayton, 
Chairman  of  the  Canadian  Board  of  Railway  Commissioners,  that  the 
so-called   loyalty   provision   under   which  a  charge  of   10  per  cent  was 


STEAMSHIP  AGREEMENTS  291 

concerned,  owing  to  the  institution  of  suits  by  the 
United  States  Attorney- General  under  the  Sherman 
Act.  In  other  trades  the  system  is  still  in  vogue.  Its 
general  significance  appears  from  the  following  find- 
ing of  the  British  Royal  Commission  on  Shipping 
Rings : 

That  a  conference  making  use  of  the  system  of  deferred 
rebates  possesses,  so  far  as  the  shipper  of  general  merchan- 
dise is  concerned,  a  limited  monopoly,  and  that  this  monopoly 
is  dependent  upon  the  system  of  deferred  rebates,  or  some  tie 
equally  effective. 

It  is  said  that  if  we  take  the  deferred  rebate  away 
from  the  conference,  "the  existence  of  conferences  de- 
pends entirely  upon  affording  the  shi^jper  satisfactory 
service  and  a  reasonable  rate."  But  even  where  the 
rebate  system  exists,  the  lines  are  not  so  powerful  as 
it  may  seem,  since  they  are  constantly  exposed  to  the 
danger  of  tramp  competition. 

The  claim  that  conferences  aim  to  kill  off  competi- 
tion is  probably  true.  But  experience  shows  that 
they  rarely  succeed.  Fights  between  lines  are  very 
costly  and  mean  an  enormous  amount  of  work  and 
worry.  Therefore,  they  are  avoided  when  possible. 
Where  the  lines  have  fought  they  have  usually  met 
with  defeat  and  have  been  forced  to  agree  to  the 
admission  of  the  new  line. 

16.  New  lines. — The  New  York-Caribbean  trade 
affords  an  interesting  example  of  the  relation  of  ex- 
made  for  primage  and  rebated  in  six  month  periods  to  all  shippers  who 
shipped  no  freight  except  by  Conference  Lines,  had  been  withdrawn 
from  then-  tariffs  in  so  far  at  least  as  Canadian  Atlantic  trade  was  con- 
cerned. 


292  SHIPPING 

isting  conferences  to  new  lines.  Until  the  end  of  the 
last  century  the  Atlas  Line,  an  English  corporation, 
was  the  only  company  offering  regular  service  in 
this  trade.  Owing  to  an  over-conservative  manage- 
ment, which  was  rather  old-fashioned  in  its  methods, 
the  company  made  little  headway.  The  Hamburg- 
American  Line,  realizing  the  opportunity  presented 
to  it,  purchased  the  company,  modernized  the 
service,  and  within  five  years  was  in  a  position  to 
show  considerable  profit.  At  that  time  the  Royal 
Mail  Steam  Packet  Company  started  a  competitive 
service  which  led  to  a  desperate  rate  war  between  the 
two  rivals.  This  ended,  after  two  years  of  struggle, 
with  an  agreement  between  the  two  companies  which 
gave  each  its  "place  in  the  sun."  It  was  the  United 
Fruit  Company  which,  by  changing  its  character  from 
a  private  line  to  that  of  a  common  carrier,  threatened 
to  disturb  the  balance  of  power.  Realizing  the 
strength  of  the  newcomer,  the  German  and  the  Brit- 
ish lines  decided  to  take  the  United  Fruit  Company 
into  their  confidence,  preferring  to  share  the  profits 
rather  than  to  risk  losing  them  in  a  hopeless  rate  war. 

17.  Combinations  among  steamship  lines  in  the 
Canadian  trade. — All  the  regular  lines  sailing  to  and 
from  Canadian  ports  are  members  of  the  different 
shipping  conferences.  The  influence  of  these  rings 
on  Canadian  trade  is  similar  to  that  on  United  States 
trade. 

There  is  a  difference,  however.  Very  few  tramp 
steamers  are  engaged  in  carrying  Canadian  goods. 


STEAMSHIP  AGREEMENTS  293 

In  the  grain  trade  for  instance,  it  has  been  shown 
that  50  to  60  per  cent  of  the  grain  from  Canadian- 
Atlantic  ports  is  ordinarily  transported  in  passenger 
ships,  only  five  per  cent  in  tramp  boats  and  all  the 
I'est  in  cargo  liners.  The  tramp  steamers  exercise 
at  best  only  a  sporadic  competition,  which  affords  no 
protection  whatever  to  shippers  requiring  regular 
shipments  in  less  than  cargo  lots. 

18.  Evidence  before  Commission  of  Investigation. 
— In  1913  the  complaints  of  Canadian  shippers  and 
trade  organizations  cuhninated  in  a  demand  upon  the 
government  for  relief,  either  thru  the  control  of  rates 
or  by  other  radical  methods.  The  result  was  the  send- 
ing of  Sir  Harry  Drayton,  Chairman  of  the  Board 
of  Railway  Commissioners,  to  the  United  Kingdom 
to  confer  with  the  British  Board  of  Trade  as  to  the 
possibility  of  empowering  a  joint  Commission  to  in- 
vestigate the  whole  question  of  ocean  rates  and 
charges.  As  a  result  of  these  conferences,  the  whole 
matter  was  referred  to  the  Dominion's  Boyal  Com- 
mission, whose  report  has  not  yet  been  made  public. 

REVIEW 

To  what  extent,  and  when,  do  combinations  in  ocean  traffic 
exist? 

What  is  the  probability  of  a  combination  among  the  owners 
of  tramp  steamers? 

Describe  the  shijDping  conferences  and  pools  which  existed  be- 
fore the  European  war  among  vessels  in  the  New  York  trade. 
Distinguish  between  a  conference  and  a  pool. 

What  advantages  are  found  in  steamship  agreements? 

Why  do  shippers  object  to  shipping  agreements?  Discuss  the 
validity  of  their  agreements. 

To  what  extent  is  the  tramp  a  competitive  factor  in  Canadian 
trade  ? 


CHAPTER  VII 

PORTS  AND  TERMINALS 

1.  Nature  and  function  of  a  jJort. — Professor  Ed- 
win J.  Clapp  describes  the  nature  and  functions  of  a 
great  seaport  as  follows: 

A  great  seaport  is  a  country's  right  hand  extended  to  for- 
eign lands  offering  them  its  products  and  requesting  theirs. 
It  is  the  focus  of  a  variety  of  communications ;  ocean  steam- 
ship lines  engaged  in  the  coasting  and  the  foreign  trade, 
inland  water  ways  and  railways.  Its  function  is  to  bring 
these  lines  into  contact  and  to  enable  them,  with  the  least 
possible  friction  and  loss  of  energy,  to  effect  the  exchange 
of  their  burdens.  In  a  seaport  are  knit  together  the  bonds 
that  unite  the  nations  in  an  ever  increasing  complexity ;  the 
seaport  is  the  highest  expression  of  that  new  phenomenon  of 
the  nineteenth  century — worldwide  trade.  It  is  the  great 
clearing  house  for  the  material  goods  of  international  com- 
merce. It  is  the  heart  of  a  country's  commercial  hfe,  draw- 
ing off  the  sluggish  flow  of  surplus  inland  production  and 
sending  back  thru  the  arteries  of  traffic  the  life-giving  cur- 
rents to  foreign  trade. 

The  seaport,  in  its  broader  sense,  is  the  most  important 
part  in  the  mechanism  of  foreign  trade.  It  is  more  than  an 
interesting  device,  it  is  a  living  organism,  or  rather,  an  essen- 
tial part  of  that  organism  which  we  call  the  state,  and  has 
a  vital  function  to  perform.  Its  function  is  to  call  into  life 
and  handle  the  streams  of  foreign  commerce  and  coastwise 
trade,  to  find  for  farms,  mines  and  factories  the  markets  and 
sources  of  foreign  supply  that  they  need,  to  organize  and 

develop  coastwise  domestic  trade.     It  is  a  function  that  is 

294 


PORTS  AND  TERMINALS  295 

of  increasing  importance  as  the  commercial  bond  uniting  na- 
tions becomes  closer,  the  national  and  international  special- 
ization of  production  more  complete,  the  volume  of  interna- 
tional exchange  greater,  and  the  competition  on  the  world's 
markets  more  severe. 

2.  Value  of  seaport  to  community  and  'liinterland" 
— A  location  on  the  coast  has  many  advantages  for 
the  community:  (a)  concentration  of  merchandise 
and  traffic;  (b)  consequent  cheapening  of  many  raw 
materials;  (c)  removal  of  many  industries  from  the 
interior  to  the  sea  border.  There  are  other  lesser 
benefits  to  the  port.  In  providing  for  coal,  provi- 
sions, wharfage,  pilotage,  towing,  etc.,  water  carriers 
give  employment  to  many  lighterage  and  cartage 
enterprises,  and  their  passengers  need  hotels  and 
boarding  houses.  Finalh^  the  warehousing  and  the 
banking  business  also  benefit  greatly  from  the  concen- 
tration of  industry  at  a  seaport. 

The  prosperity  of  all  these  classes  is  reflected  thru- 
out  the  country  at  large,  particularly  in  its  hinterland, 
or  interior.  The  interior  may  derive  even  greater 
benefit  from  the  service  of  the  seaport  than  the  sea- 
port itself.  Thus,  interior  New  England  sends  or  re- 
ceives three  tons  of  freight  thru  the  Boston  gateway 
for  every  ton  transshipped  there  to  the  port  itself, 
thus  getting  three-fourths  of  the  direct  advantage  of 
every  Boston  steamship  service  for  everj^  one-fourth 
that  Boston  retains.  This  indicates  the  true  relation- 
ship between  the  seaport  and  its  hinterland. 

3.  Four  classes  of  points. — The  port  as  the  terminal 


296  SHIPPING 

of  the  ocean  route  comprises  three  distinct  parts: 
the  channel  from  the  sea,  the  harbor  proper,  and  the 
facihties  for  receiving  and  forwarding  traiBc.  This 
classification  covers  merely  the  physical  equipment  of 
the  port.  According  to  Dr.  Kmory  R.  Johnson,  ports 
may  be  divided  into  four  classes:  the  roadstead, 
the  natural  bay,  the  river  port,  and  the  combina- 
tion of  river  and  bay  port.  Among  ports  of  the 
first  type  are  Dover,  England,  and  San  Pedro,  Cal- 
ifornia. Here  the  governments,  by  constructing 
breakwaters  and  by  dredging  the  basins  inclosed  by 
the  breakwaters,  have  created  artificial  harbors.  Nat- 
ural bay  ports  are  the  Puget  Sound  ports;  Pensacola, 
Florida;  Rio  de  Janeiro,  Brazil;  Victoria  and  Lis- 
bon, Portugal.  In  ahnost  all  cases  the  depth  of  the 
bay  has  to  be  increased  by  dredging. 

Most  seaports,  however,  are  located  at  the  point 
where  river  and  ocean  navigation  meet.  Formerly 
this  point  was  found  much  farther  inland  than  it 
is  today,  when  the  draft  of  ocean  vessels  is  thirty 
feet  or  more.  For  example,  Cologne  on  the  Rhine, 
210  miles  up  the  river  from  the  Hook  of  Holland,  in 
mediaeval  times  was  a  gi-eat  seaport,  altho  the  depth  of 
the  channel  could  hardly  have  amounted  to  more  than 
three  feet.  Ports  like  Hamburg,  85  miles  up  the 
Elbe,  Bremen,  75  miles  up  the  Weser,  and  Antwerp, 
59  miles  up  the  Scheldt,  hold  their  position  only  be- 
cause of  enormous  expenditure  to  adapt  the  channels 
of  these  rivers  to  modern  requirements.     And  even 


PORTS  AND  TERMINALS  297 

in  spite  of  all  efforts  the  largest  ships  can  no  longer 
enter  these  ports,  but  must  stop  at  outside  stations 
at  the  mouth  of  the  river,  such  as  Cuxhaven  and  Wil- 
heknshaven.  Likewise,  large  steamers  for  London 
get  only  as  far  up  as  Tilbury  Docks. 

London,  Rotterdam,  Montreal,  Philadelphia,  New 
Orleans,  and  Portland,  Oregon,  are  other  significant 
examples  of  river  ports.  The  river,  first  by  the  trans- 
portation service  which  it  renders  itself,  and  later  on 
by  the  competition  which  it  causes  to  railroad  trans- 
jDortation,  has  laid  the  foundation  of  the  prosperity  of 
these  ports. 

The  most  favorable  location  for  a  port  is  the  head 
of  a  bay  into  which  a  large  river  discharges.  New 
York  is  the  most  conspicuous  example  of  such  a 
port.  Its  maritime  commerce  excels  that  of  any  other 
port  in  the  world.  For  this  reason,  as  well  as  be- 
cause of  the  fact  that  New  York  forms  the  main  gate- 
way of  the  foreign  commerce  of  this  country,  we 
shall  here  give  a  more  detailed  account  of  the  present 
status  and  future  possibilities  of  this  port. 

4.  New  York's  predovimance. — The  Department 
of  Commerce  of  the  United  States  credits  New  York 
with  an  aggi-egate  foreign  trade  of  $2,125,000,000  in 
the  fiscal  year  1915,  or  $200,000,000  more  than  the 
trade  of  London.  For  the  sake  of  comparison,  the 
figures  showing  the  value  of  imports  and  exports  of 
the  twenty  leading  ports  of  the  world,  according  to 
the  latest  available  statistics,  are  given  on  page  298. 


298  SHIPPING 


Imports  Exports 

New  York $931,000,000             $1,193,600,000 

London    1,232,100,000  696,000,000 

Hamburg    1,084,300,000  817,300,000 

Antwerp    623,200,000  588,200,000 

Liverpool    810,000,000  836,000,000 

Marseilles    389,600,000  365,700,000 

Havre    357,900,000  258,800,000 

Bremen    370,600,000  211,400,000 

Calcutta    229,300,000  317,600,000 

Bombay    202,800,000  225,400,000 

Buenos  Aires    200,800,000  140,400,000 

Trieste    176,000,000  161,400,000 

Singapore 186,400,000  145,400,000 

Hull    199,700,000  130,500,000 

Sydney    151,900,000  151,400,000 

Genoa    199,800,000  103,100,000 

New  Orleans 79,700,000  209,400,000 

Montreal    141,200,000  119,300,000 

Boston    152,700,000  107,500,000 

Shanghai    159,200,000  98,600,000 

Manchester     164,200,000  93,200,000 

Galveston    10,100,000  230,400,000 

Glasgow    82,100,000  155,000,000 

Kobe    140,400,000  83,400,000 

Dunkirk    187,500,000  36,200,000 

Yokohama    89,000,000  134,200,000 

Alexandria,  Egypt  .  .  .  91,100,000  116,100,000 

Melbourne     118,400,000  86,400,000 

Southampton    91,100,000  94,700,000 

Petrograd 110,900,000  69,100,000 

New  York's  share  of  the  exports  and  imports  of  this 
country  amounted  to : 


PORTS  AND  TERMINALS  299 

Year  Exports                                 Imports 

1862    72  per  cent  68  per  cent 

1872    53  per  cent  66  per  cent 

1882    43  per  cent  68  per  cent 

1892    40  per  cent  64  per  cent 

1902    36  per  cent  61  per  cent 

1912   37  per  cent  52  per  cent 

1913    37  per  cent  57  per  cent 

1914    37  per  cent  55  per  cent 

1915    43  per  cent  56  per  cent 

1916 53  per  cent  54  per  cent 

Official  statistics  show  that  New  York  has  collected, 
for  the  last  20  years,  an  average  of  65  per  cent  of  the 
nation's  customs. 

5.  New  York's  '' hinterland/' — The  hinterland  of 
New  York,  because  of  the  unparalleled  concentration 
of  trunk  lines  at  this  port  and  the  competition  existing 
among  them,  extends  far  beyond  the  normal  sphere 
of  influence  of  a  port.  This  railroad  situation  tends 
to  perpetuate  in  New  York  the  preponderance  in  ex- 
ports from  the  West,  the  foundation  of  which  was  laid 
l)y  the  Erie  Canal.  The  preeminence  of  New  York 
among  the  ports  of  the  Atlantic  seacoast  is  so  marked 
that  New  York  is  in  a  class  by  itself,  all  other  ports 
being  called  "outports."  These  "outports"  must  con- 
tent themselves  with  only  one  or  two  or  three  trunk 
lines.  Thus,  Norfolk  is  reached  by  the  Norfolk  and 
Western;  Newport  News  by  the  Chesapeake  and 
Ohio.  Both  these  railroad  companies  enter  New  York 
via  the  route  of  the  Old  Dominion  Steamboat  Com- 


300  SHIPPING 

pany,  in  which  they  are  part  owners.  Baltimore  is  the 
home  port  of  the  Baltimore  and  Ohio,  which  shares 
the  trade  of  this  port  with  the  Pennsylvania  and  the 
Western  Maryland  (now  part  of  the  New  York  Cen- 
tral System).  Philadelpliia  has  the  Pennsylvania 
Railroad,  but  is  also  served  by  the  Baltimore  and  Ohio 
and  by  the  Reading.  None  of  these  roads  can  dispense 
with  a  direct  or  indirect  connection  with  New  York, 
which  has,  in  addition,  two  exclusive  trunk  lines  of  its 
own,  the  New  York  Central  and  the  Erie. 

6.  Railroad-steamsldp  lines. — Railroad  facilities 
attract  line  service,  either  by  their  mere  presence,  as 
in  the  case  of  New  York,  or  by  special  inducement, 
as  in  most  "outports."  These  inducements  may  take 
the  form  of  railroad  participation  in  the  construction 
of  steamship  lines,  the  guarantee  of  a  minimum  cargo 
for  proposed  sailings,  or  an  exclusive  contract  with  the 
steamship  line  to  give  it  all  the  cargo  collectible.  The 
railroads  often  refuse  to  grant  thru  bills  of  lading  for 
shipments  going  thru  other  ports  than  that  in  which 
they  are  particularly  interested.  It  is  a  common  prac- 
tice for  a  railroad  to  grant  the  use  of  a  pier  free  of 
charge  to  that  steamship  line  with  which  it  cooper- 
ates. In  the  case  of  New  York,  the  steamship  lines 
are  so  anxious  to  share  in  the  rich  traffic  of  that  port 
that  no  inducement  seems  necessary. 

7.  Charter  traffic  in  Atlantic  seajwi'ts. — As  far  as 
tramp  traffic  is  concerned,  New  York  does  not  hold 
tlie  same  leading  position,  as  appears  from  the  follow- 
ing table.     It  is  true  that  these  figures  refer  only  to 


PORTS  AND  TERMINALS 


301 


grain  cargoes.  Since,  however,  grain  is  the  most  im- 
portant outward  cargo  for  tramps,  the  figures  given 
below  may  be  considered  as  representative  of  the  situ- 
ation. 


Number  of  Full  Grain  Cargoes  Loaded  at  Philadelphia, 
Baltimore,  Boston,  and  New  York.^ 
Year  Philadelphia    Baltimore         Boston 


1878  13 

1883  

1888  

1893  .... 

1898  

1903  

1908  

1909  .... 

1910  

1911  

1912  

1913  

1914  .... 
19152  . . . 


13 

37 

46 

152 

3 

43 

30 

64 

243 

284 

18 

31 

42 

5 

13 

11 

1 

11 

14 

17 

36 

58 

34 

129 

29 

156 

33 

145 

New  York 

29 
24 
21 
86 
269 
11 


4 
24 
20 

74 
86 


The  strong  position  of  Philadelphia  and  Baltimore 
in  the  grain  trade,  as  far  as  it  is  carried  on  by  tramps, 
is  due,  among  other  reasons,  to  the  differential  rail 
rate  which  favors  these  ports  over  New  York  and 
Boston,  the  reasons  for  which  are  explained  in  the 
Modern  Business  Text  on  "Railway  Traffic."  The 
recent  revival  of  grain  traffic  at  New  York,  beginning 
in  1910,  is  due  to  the  establishment  of  an  elevator  serv- 
ice at  reduced  charges,  this  reduction  largely  offset- 

1  This  table  was  furnished  by  Frank  L.  Neall,  manager  Consolidated 
NeiDs,  Statistics  and  Transportation  Bureau,  Philadelphia. 

2  To  March  31st. 


302  SHIPPING 

ting  the  effect  of  the  differential.  Boston  gets  only 
a  rare  overflow  cargo,  owing  mainly  to  the  effect  of 
the  railroad  differential  against  the  port,  on  exports 
from  the  West. 

8.  ^'Entrepot"  or  transshipment  trade. — While  to- 
day railroad  and  steamship  connections  are  the  deter- 
mining factors  in  the  upbuilding  of  a  great  port,  an- 
other feature  of  port  development  is  of  greatest  im- 
portance: "entrepot"  or  transshipment  trade.  In 
olden  days  this  trade  was  often  based  upon  a  privi- 
lege granted  to  certain  cities  by  the  ruling  power,  and 
in  many  cases  was  the  key  to  successful  port  develop- 
ment. London  and  Hamburg  owe  much  of  their 
present  greatness  to  their  transshipment  trade.  Nor- 
mally, Hamburg  is  supreme  in  the  transshipment 
trade  with  Russia  and  Scandinavia.  Whether  it  will 
regain  its  position  lost  as  a  result  of  the  war,  is  a  ques- 
tion which  cannot  now  be  answered.  The  extent  of 
London's  transshipment  trade  can  hardly  be  measured 
as  a  separate  unit  by  itself.  In  a  consideration  of 
England's  trade,  London,  Liverpool  and  other  mar- 
kets must  be  taken  together  as  coordinated  markets 
with  London  as  the  controlling  center,  for  commodi- 
ties traded  at  London  are  often  warehoused  in  other 
English  ports.  Among  the  hundreds  of  things  that 
England  re-exported  we  find  over  6,000,000  pounds 
of  pepper,  almost  14,000,000  pounds  of  raw  cocoa, 
53,000,000  pounds  of  tea,  more  than  3,000,000  pounds 
of  tobacco,  338,000,000   pounds  of  ordinary  wool. 


PORTS  AND  TERMINALS  303 

324,000,000  pounds  of  raw  cotton,  923,000,000  pounds 
of  palm  oil,  978,000,000  pounds  of  tallow,  and 
726,000,000  pounds  of  rubber. 

Compared  with  this,  the  re-export  trade  of  tlie 
United  States  is  exceedingly  small.  Measured  by  its 
value  in  1913  it  amounted  to  but  l!4  per  cent  of  all 
exports,  and  %  per  cent  of  all  the  country's  com- 
merce. It  has  been  decreasing  in  proportion  to  the 
whole  trade. 

.The  main  advantage  derived  from  "entrepot"  trade 
may  be  seen  in  the  establishment  of  large  markets. 
These  markets  attract  considerable  amounts  of  mer- 
chandise which  would  otherwise  be  shipped  to  other 
parts  of  the  world.  London's  privileged  position  as 
the  world's  consignment  market  is  the  best  illustration 
of  this  condition.  A  consignment  shipment  is  ex- 
ported before  a  foreign  buyer  has  been  found.  If  a 
merchant  or  producer  cannot  wait  until  he  has  sold 
his  goods  to  ship  them,  and  is  unable  to  sell  his  goods 
afloat,  he  consigns  them,  in  most  cases,  to  a  merchant 
in  London,  where  most  commodities  can  be  readily 
sold.  For  certain  goods,  such  as  coffee,  Hamburg 
has  become  a  consignment  market. 

9.  Lack  of  transshipment  trade  at  New  York, 
— New  York  as  a  trading  center,  i.e.,  a  market  for 
commodities,  takes  a  place  behind  London  and  Ham- 
burg, and  in  a  way  is  hardly  of  greater  importance 
than  several  minor  European  cities.  New  York  is  not 
a  focus  where  large  quantities  of  raw  materials  and 

XV — 21 


304  SHIPPING 

manufactures  converge  from  all  parts  of  the  world  to 
be  sold  and  distributed  again  to  other  far  corners  of 
the  globe.    It  has  not  yet  become  a  market  port. 

Many  reasons  explain  the  different  position  of 
London  and  Hamburg  on  the  one  side,  and  New  York 
on  the  other.  American  commercial  banking,  until 
the  passing  of  the  Federal  Reserve  Law,  was  unable 
to  finance  foreign  trade  to  any  extent,  consequently 
London's  supremacy  as  the  financial  center  of  the 
world  went  almost  unchallenged.  Furthermore,  in 
contrast  to  New  York,  London  and  Hamburg  possess 
warehouse  systems  which  are  developed  to  a  high  de- 
gree of  efficiency.  An  asset  that  New  York  does  not 
yet  possess,  is  the  close  cooperative  organization  of 
great  foreign  trading  houses,  with  branches  and  cor- 
respondents in  all  parts  of  the  world,  which,  in  the 
case  of  Hamburg,  may  be  said  to  amount  almost  to 
free  masonry  in  the  execution  of  trade. 

10.  British  raw  materials. — Thru  large  markets, 
which  often  take  the  form  of  auction  markets,  London 
exercises  a  powerful  control  over  the  world's  supply 
of  important  raw  materials,  especially  of  wool  and 
raw  rubber.  Modern  manufacturing  often  requires 
the  mixing  of  different  grades  of  raw  materials  that 
are  produced  in  different  parts  of  the  world.  This 
mixing  renders  the  assembling  of  raw  materials  in 
great  central  markets  most  desirable. 

To  be  sure,  London  owes  much  of  its  position  as  the 
world's  leading  trading  center  to  its  position  as  the 


PORTS  AND  TERMINALS  305 

capital  of  the  British  Empire.  How  large  a  portion 
of  the  world's  important  raw  materials  is  grown  in 
the  British  Empire  appears  from  the  following  table. 
Here  the  imports  of  the  United  States  for  the  fiscal 
year  1914  are  divided  according  to  their  source  of 
origin.  This  table  summarizes  the  possessions  of  all 
the  Entente  Allies  in  the  European  war  and  does  not 
show  the  British  colonies  separately.  These,  how- 
ever, form  a  large  proportion  of  the  territory  con- 
trolled by  the  Allies. 

ANALYSIS  OF  UNITED  STATES'  IMPORT  OF  RAW 
MATERIALS  FOR  THE  YEAR  1914. 

From  From 

Non-Ally  the  Entire 

Territory  World 

Abrasive  materials $319,220  $855,412 

Aluminum    1,130,390  2,707,006 

Antimony     200,083  696,362 

Asbestos    1,790  1,678,736 

Asphalt  and  bitumen  445,623  722,339 

Bismuth    253  241,449 

Dried  blood  145,165  391,816 

Bones,  hoofs  and  horns   720,220  1,061,466 

Bristles    1,761,851  3,196,469 

Chalk     15,368  156,525 

Chemicals   44,604,486  62,531,241 

Vanilla  beans   1,236,718  2,277,675 

Wax   mineral    472,999  543,103 

Wax    vegetable    925,279  1,049,126 

Gums     2,529,301  12,735,627 

Chicory     24,502  47,882 

Clay  and   earth    232,493  2,246,807 

Cobalt  ore   53,062  115,038 

Cocoa     3,739,573  20,797,790 

Logwoods     186,166  487,992 

Feathers,    undressed     305,040  4,871,663 

Fertilizers   (except  potash)    3,104,600  7,990,023 

Coffee    110,649,987  110,725,392 

Cork    3,942,156  6,499,632 

Cotton    (raw)     6,303,556  19,456,588 

Potash  and  manure  salts 15,048,836  15,160,123 


306 


SHIPPING 


From  From 

Non-Ally  the  Entire 

Territory  World 
Fibers : 

Flax     64,3T8  21,870,274 

Hemp    159,536  1,564,483 

Jute     63,363  11,174,028 

Miscellaneous  fibers    37,140,308  39,974,032 

Fluorospar      1,818  50,851 

Oleaginous    nuts    4,013,064  7,769,054 

Furs   and   skins    5,306,039  13,835,646 

Gelatin    606,542  738,731 

Glue     985,457  1,805,543 

Grease     738,416  1,800,650 

Hair    1,379,442  3,369,978 

Hides   and  skins    57,559,395  119,374,587 

Rubber,  gutta  percha,  etc 24,566,609  76,162,220 

Iridium     43,824  207,832 

Iron   chromate    195,223  737,127 

Iron    ore    5,386,041  11,901,007 

Ivory     113,885  1,340,644 

Ivory,   vegetable    844,843  881,354 

Manganese  oxide   576,051  1,841,451 

Ferro  alloys    3,741,281  6,630,538 

Mica    78,561  836,815 

Monozite   sand,    etc 52,339  52,329 

Moss,   etc 120,856  301,259 

Nickel    ore    836  6,203,301 

Oakum    $241,488  $1,033,251 

Palladium,   etc 20,006  169,171 

Platinum    1,378,513  1,846,126 

Graphite     224,055  1,846,126 

Radium     37,851  59,816 

Vegetable  oils: 

Cocoa  butter  and  oil   2,661,683  7,497,393 

Olive    oil    1,096,876  8,394,190 

Palm  oil,  soya,  etc 3,871,669  10,549,034 

Silk     15Jp61,541  97,828,243 

Spices     7,802,104  11,962,557 

Sponges    211,735  481,973 

Sulphur    2,970,036  3,695,335 

Tanning  material    1,180,45R  1,566,001 

Tin     1,937,676  39,437,430 

Tobacco    34,397,488  35,034,929 

Tungsten    78,709  129,291 

Wax     401,030  476,364 

Whalebone     11,452 

Woods,  etc.: 

Briarwood    1,865  241,493 

Cabinet    woods     3,281,817  9,341,339 

Rattans     175,388  510,842 

Wood  pulp    11,046,802  17,023,333 


PORTS  AND  TERMINALS  307 

From  From 

Non-ally  the  Entire 

Territory  World 

Wools: 

Wool,  clothing    8,846,430  28,9i?2,605 

Wool,  combing     577,948  3,857,123 

Wool,  carpet     7,898,170  17,029,611 

Wool,  angora,  etc 266,513  572,430 

$447,881,504  $909,027,580 

11.  Free  ports, — One  practical  step  toward  estab- 
lishing a  large  transshipment  trade  at  the  port  of 
New  York  has  been  made  in  the  proposition  for  mak- 
ing it  a  "free  port."  Such  an  institution  is  merely  a 
section  of  a  port,  in  some  cases  an  entire  port,  which 
is  excluded  from  the  customs  territory.  This  exclu- 
sion facilitates  re-exportation,  since  it  saves  the  trou- 
ble involved  in  bringing  goods  thru  the  customs. 

Another  type  of  free  port  is  that  of  Hongkong. 
This  harbor — whose  vessel  tonnage  entering  increased 
265  per  cent  from  1888  to  1912,  while  that  of  New 
York  during  the  same  period  increased  but  140  per 
cent — is  an  absolutely  free  port.  There  are  great 
"go-downs" — as  warehouses  are  termed  in  that  part 
of  the  world — manufacturing  establishments,  com- 
mercial houses,  banks,  and  all  the  paraphernalia  of 
trade;  and  the  commerce  and  industries  connected 
with  the  business  thus  built  up  now  support  a  popula- 
tion of  approximately  400,000.  Copenhagen  was 
made  a  free  port  in  1891.  Just  now,  Spain  is  trying 
to  improve  her  position  as  a  neutral  trading  nation  by 
establishing  a  free  port  in  one  of  her  great  ports. 
Many  other  free  ports  exist. 

Just  now  a  resolution  is  before  Congress  providing 


308  SHIPPING 

for  a  commission  to  consider  the  question  of  creating 
free  ports  in  the  United  States/  The  resolution  is 
strongly  supported  by  the  Merchants'  Association  in 
New  York  which  is  said  to  have  originated  the  free- 
port  idea  in  this  country.  Several  years  ago  the 
Merchants'  Association  sent  Mr.  Philip  B.  Kennedy, 
an  expert  in  trade  and  transportation,  to  Europe  to 
make  a  sui'vey  and  complete  study  of  the  leading  Eu- 
ropean free  ports.  His  report,  covering  fifty-five 
pages,  was  pubhshed  in  February,  1914,  by  the  Asso- 
ciation, and  amounts  to  a  strong  recommendation  for 
the  establishment  of  a  free  port  in  New  York. 

An  essential  feature  of  the  equipment  of  a  modern 
seaport  is  the  freight-handling  machineiy.  The  ten- 
dency of  the  age  is  to  economize  in  labor  by  investing 
capital  in  machinery.  In  Hamburg,  whose  port  pos- 
sesses an  excellent  equipment  of  electric  and  hydraulic 
cranes  and  hoists,  a  remarkable  speed  in  the  handling 
of  trade  is  attained.  Thus  the  average  rate  of  dis- 
charge at  the  "Kuhwarder  piers"  is  250  tons  of  gen- 
eral cargo  per  hour.  In  the  handling  of  bulk  com- 
modities the  ports  of  United  States  are  probably  su- 
perior to  all  others. 

1  In  the  summer  of  1916,  following  the  lead  of  the  United  States  agita- 
tion on  the  subject,  a  proposal  was  made  that  a  stretch  of  shore  opposite 
Montreal,  extending  from  St.  Lambert  to  Longueuil,  should  be  set  aside 
by  the  Canadian  government  as  a  free  port  and  that  goods  should  be 
permitted  to  pass  in  or  out,  duty  free.  The  proposal,  however,  was  given 
little  serious  consideration,  partly  because  of  its  newness  and  partly  be- 
cause it  was  difficult  to  see  just  what  advantages  would  accrue  to  the 
country  as  a  whole.  In  most  cases  Canadian  manufacturers  are  now 
getting  their  raw  materials  free  as  it  is,  and  Canada  as  yet  can  make 
little  pretense  of  being  a  great  intermediary  trading  nation. 


PORTS  AND  TERMINALS  309 

12.  Rail  and  water  coordination  of  carriers. — An 
important  problem  of  harbor  traffic  is  the  coordination 
of  rail  and  water  carriers.  That  means  providing  the 
most  economical  method  of  exchanging  freight  be- 
tween rail  and  water  carriers.  The  lack  of  such  a 
method  results  in  serious  waste  in  drayage,  lighterage 
and  switching.  Wherever  it  is  possible,  piers  and 
quays  ought  to  possess  direct  rail  connection.  Vari- 
ous railroads  serving  a  port  should  be  linked  together 
by  such  a  belt  line  as  that  which  exists,  for  instance, 
in  New  Orleans.  New  York  has  a  natural  belt  line  in 
its  harbor  waters.  In  New  York  an  extensive  car- 
float  service  and  a  lighterage  system,  with  free  deliv- 
ery within  extensive  limits,  greatly  facilitate  the  mov- 
ing of  cargo  from  any  part  of  the  harbor  to  another, 
from  one  railroad  to  another.  The  existence  of  such 
service  accounts  for  the  decentralization  of  industries 
thruout  Greater  New  York.  Factories  are  scattered 
over  almost  the  entire  waterfront,  including  Manhat- 
tan, Staten  Island,  Brooklyn  and  the  Bronx. 

13.  American  International  Terminal  Corporation. 
— One  of  the  most  promising  events  in  the  world  of 
dock  development  is  the  organization  of  the  American 
International  Terminal  Corporation,  a  subsidiary  of 
the  American  International  Corporation.  This  new 
company  has  been  formed  to  make  a  study  of  railway, 
steamship,  warehouse  and  industrial  terminals.  The 
American  International  Corporation,  because  of  its 
interest  in  the  development  of  South  American  trade 
and  also  because  of  its  extensive  holdings  of  shipping 


310  SHIPPING 

stocks — it  owns  large  amounts  of  shares  of  the  Inter- 
national Mercantile  Company  and  the  United  Fruit 
Company,  and  in  connection  with  its  associate,  W.  R. 
Grace  and  Company,  controls  the  Pacific  Mail  Steam- 
ship Company — is  vitally  concerned  in  the  bringing 
about  of  better  rail  and  water  coordination  in  Ameri- 
can ports.  It  is  asserted  that  transportation  on  land 
and  sea  has  reached  higher  development  in  traveling 
and  carrying  equipment  than  in  terminal  facilities. 

The  significance  of  the  terminal  problem  was  well 
stated  by  an  officer  of  the  new  company,  in  the  follow- 
ing words: 

It  is  well  known  that  the  capacity  of  a  railroad  is  limited 
to  what  its  terminals  can  handle.  Its  miles  of  track  cannot 
be  used  to  their  utmost  if  the  terminals  cannot  take  care  of 
the  freight.  Likewise  the  greatest  preventable  waste  of  the 
time  of  cargo  ships  occurs  at  docks  and  anchorage,  incident 
to  loading  and  unloading.  Transfer  facilities  in  general — 
involvmg  the  discharge  of  goods  from  trains,  their  distri- 
bution to  consumers,  their  storage  in  warehouses,  their  ex- 
change from  one  railroad  to  another,  their  loading  into  ships 
— all  of  these  functions  are  more  difficult,  more  costly,  and 
less  understood  than  the  straight  carriage  of  goods  by  rail 
and  boat. 

14.  Canada's  leading  summer  port:  Montreal. — No 
single  port  in  Canada  holds  a  place  comparable  to  that 
of  New  York.  Montreal  most  nearly  approximates 
it.  Among  Canada's  ports  it  is  easily  first,  both  in 
exports  and  in  imports,  in  spite  of  the  fact  that  it  is 
closed  for  nearly  five  months  in  the  year.  The  ex- 
ports from  Montreal  during  the  calendar  year  1916 


PORTS  AND  TERMINALS  311 

amounted  to  $382,741,463,  and  its  imports  to 
$194,924,348,  or  34  per  cent  and  26  per  cent,  respec- 
tively, of  the  totals  for  the  whole  of  Canada.  These 
figures  are  higher  than  usual,  but  in  the  last  three 
years  Montreal  has  received  24  per  cent  of  Canada's 
imports,  and  despatched  22  per  cent  of  her  exports. 
Ordinarily  about  one-fourth  of  Canada's  customs  dues 
are  collected  at  this  port.  In  respect  of  tonnage 
again,  it  is  excelled  by  two  only,  and  in  some  years  by 
one  only,  of  Canada's  ports.  For  1915  the  total  ton- 
nage of  the  484  trans-Atlantic  steamers,  the  331  ships 
from  the  Maritime  provinces,  and  the  8,572  "inland" 
vessels  from  the  Upper  Lakes,  which  arrived  in  the 
harbor  amounted  to  6,483,700.  The  sea-going  ton- 
nage of  4,031,299  in  1915  compared  with  a  total  of 
13,132,944  for  the  whole  of  Canada.  In  the  previous 
season,  the  number  of  vessels  arriving  at  the  port  of 
Montreal  was  13,141,  with  a  tonnage  of  9,044,457. 

15.  Montreal's  hinterland. — The  inland  seaport 
owes  its  dominance  to  its  position  at  the  point  of  con- 
vergence of  important  commercial  highwaj^s.  The 
St.  Lawrence  Ship  Channel,  on  which  some 
$70,000,000  has  been  spent  by  the  government,  leads 
to  the  Atlantic.  The  Ottawa  River  also  leads  up  to 
the  Dominion  capital  and  to  the  greatest  lumbering 
region  of  the  country.  Direct  access  by  rail  and  canal 
is  also  secured  to  the  Hudson  Valley  and  New  York 
thru  the  valley  of  the  Richelieu  River. 

But  more  important  is  the  magnitude  of  the  port's 
hinterland.     It  is  the  natural  outlet  for  Ontario.     It 


312  SHIPPING 

is  also  the  natural  Canadian  outlet  for  nearly  the 
whole  interior  of  the  country.  The  Great  Lake 
routes,  the  greatest  of  fresh  water  transportation  sys- 
tem in  the  world,  converge  upon  it. 

16.  Canadian  Pacific  and  Grand  Trunk  Railways. 
— Montreal  is  the  headquarters  of  the  Canadian  Paci- 
fic, the  Grand  Trunk  and  the  Grand  Trunk  Pacific 
Railways  which  gather  grain,  cattle,  fruit,  dairy  prod- 
uce, minerals  and  other  products  from  the  interior  of 
Canada.  These  railways,  in  addition  to  their  Cana- 
dian mileage,  own  a  large  mileage  in  the  United 
States,  stretching  out  to  Chicago  and  other  important 
centers  of  the  Central  and  Western  states.  For  the 
Canadian  Northern  Railway,  Montreal,  tho  not  the 
headquarters,  is  the  most  important  seaport.  Fi- 
nally, it  is  the  western  terminus  of  the  Intercolonial 
Railway.  All  these  routes  facilitate  the  collection  of 
coal  and  raw  materials,  leading  to  large  manufactur- 
ing industries  on  the  harbor  waterfront  which  also  re- 
ceive assistance  from  the  cheap  water  power  of  the 
nearby  Lachine  Rapids. 

17.  Coordination  of  rail  and  water  services  at  Mon- 
treal.— The  importance  of  coordination  of  rail  and 
water  carriers  has  already  been  pointed  out.  In  this 
respect  Montreal  is  well  served.  One  of  the  unique 
features  of  the  port  is  the  complete  ownership  by  the 
Dominion  government  of  the  entire  waterfront,  in- 
cluding both  sides  of  the  river  for  a  length  of  eighteen 
miles.  Control  is  exercised  by  a  harbor  board  of  three 
commissioners.     Thej^  control  also  a  well-equipped 


PORTS  AND  TERMINALS  313 

freight  transportation  railway.  The  charges  for 
moving  cars  are  set  forth  in  a  tariff  adopted  by  the 
harbor  board.  The  system  is  connected  with  every 
railway  that  enters  or  terminates  at  Montreal,  and  in- 
cludes over  fifty  miles  of  tracks. 

18.  Traffic  to  and  from  Montreal. — Situated  at  the 
point  where  grain  from  the  West  is  transshipped  from 
the  railroads,  and  from  lake  and  river  boats  to  ocean 
steamers,  Montreal  has  the  largest  gi^ain  elevators  of 
any  ocean  port.  The  total  capacity  of  the  elevators 
is  now  nearly  9,000,000  bushels  of  grain.  In  the  sea- 
son of  1914  they  handled  over  75,000,000  or  over 
10,000,000  more  than  New  York,  the  nearest  competi- 
tor among  the  Atlantic  ports. 

19.  Canadian  Pacific  imrts. — On  the  Pacific  coast, 
Canada's  principal  ocean  ports,  are  Vancouver,  Vic- 
toria and  Prince  Rupert,  all  three  with  splendid  nat- 
ural harbors  and  all  three  nearer  to  the  Orient  than 
Pacific  ports  of  the  United  States.  The  building  of 
the  Panama  Canal  led  to  considerable  improvements 
b}^  the  government  and  the  railways  in  ocean  terminal 
facilities  in  all  three  cases. 

In  respect  to  tonnage,  Vancouver  and  Victoria  lead 
the  Dominion  ports.  In  1916,  the  tonnage  of  sea-go- 
ing vessels  entering  and  clearing  from  Victoria  was 
4,169,908.  Vancouver  tho  with  a  larger  total  ton- 
nage, ranked  only  second  from  the  point  of  view  of 
sea-going  tonnage  with  3,481,761  tons. 

20.  St.  John  and  Halifaoc. — On  the  Atlantic  coast 
are  the  ports  of  St.  John  and  Hahfax,  which,  along 


314.  SHIPPING 

with  Portland,  Me.,  share  the  trade  lost  to  Montreal 
during  the  winter  months.  St.  John  is  the  winter 
port  for  the  Canadian  Pacific  liners  from  Liverpool. 
Halifax  has  one  of  the  finest  and  safest  harbors  in  the 
world.  It  is  easily  accessible  from  the  ocean  by  the 
largest  vessels  afloat,  in  any  weather  and  at  any  state 
of  the  tide.  Halifax  is  616  geographical  miles  nearer 
to  Liverpool  than  is  New  York.  It  has  also  a  similar 
advantage  of  200  miles  over  St.  John,  and  chiefly  be- 
cause of  this  it  makes  a  claim  for  supremacy  as  Can- 
ada's leading  winter  port.  Its  rival  makes  the  coun- 
ter-claim that  it  is  nearer  the  center  of  Canada  where 
the  freight  originates.  Just  at  present,  measured  by 
sea-going  tonnage  and  by  exports  and  imports,  St. 
John  is  in  the  lead. 

Quebec,  which  was  formerly  an  important  ship- 
building and  timber  port,  has  lost  much  of  its  impor- 
tance since  the  deepening  of  the  St.  Lawrence  to  Mon- 
treal. It  has,  however,  a  fine  harbor,  and  the  terminal 
and  elevator  facilities  are  ample  for  a  considerably 
larger  business  than  the  port  at  present  enjoys. 

REVIEW 

What  is  the  importance  of  a  port,  and  what  is  its  relation  to  its 
hinterland  ? 

Describe  four  classes  of  ports  differing  in  their  physical  char- 
acteristics. 

What  is  the  relative  importance  of  New  York  among  the  great 
ports  of  the  world,  and  among  the  ports  of  the  United  States? 
How  have  railroads  contributed  to  its  development? 

How  do  the  shipping  facilities  of  New  York  compare  with 
those  of  other  American  ports  in  liner  service?  In  tramp  serv- 
ice? 


PORTS  AND  TERMINALS  315 

What  is  the  significance  of  transshipment  business,  and  why  is 
it  more  highly  developed  abroad  than  in  New  York? 

Describe  free  ports  and  the  function  which  they  perform.  Dis- 
cuss the  proposal  for  a  free  port  at  New  York. 

What  is  the  physical  relationship  between  ocean  shipping  and 
the  railways .''  How  closely  are  they  associated  in  actual  manage- 
ment ? 

Give  reasons  for  the  present  position  of  Montreal  among 
Canadian  seajx)rts. 


CHAPTER  VIII 

STATUS  OF  AMERICAN  AND  CANADIAN  MERCHANT 
MARINE,  AND  RECENT  LEGISLATION 

1.  Present  role  of  American  shipping. — Of  the 
overseas  commerce  of  the  United  States  only  a  small 
proportion — 10.1  per  cent  in  1913,  9.7  per  cent  in  1914 
and  11.4  per  cent  in  1916 — is  carried  in  American  bot- 
toms. Tho  the  merchant  fleet  of  the  United  States 
ranks  second  to  that  of  Great  Britain,  it  is  for  the  most 
part  operated  in  coastwise  traffic  and  on  the  Great 
Lakes.  In  the  general  carrying  trade  of  the  world 
American  shipping  plays  only  a  minor  role.  British 
and  Norwegian  ships  transport  the  commerce  of  their 
own  countries  and  a  large  share  of  that  of  other  na- 
tions. The  United  States  does  not  even  carry  its  own 
commerce. 

2.  Coastwise  tonnage. — It  should  be  borne  in  mind 
that  no  problem  has  arisen  in  connection  with  that  part 
of  our  merchant  marine  which  is  engaged  in  the  home 
trade  of  the  country  on  ocean,  lake  and  river.  This 
part  of  our  navigation  has  been  reserved  to  American 
vessels  since  the  founding  of  the  Federal  government. 
The  early  policy  of  reserving  our  coastwise  tonnage  to 
American  registry  and  ownership,  followed  without 
material  modification  ever  since,  has  resulted  in  a 
steady  rise  of  our  coastwise  and  lake  tonnage  from 

316 


AMERICAN  MERCHANT  MARINE  317 

66,607  in  1789  to  6,852,536  in  1914.  The  coastwise 
shipping  represented  by  these  figures  considerably 
excels  that  of  any  other  nation.  Indeed  these  figures 
are  even  greater  than  those  of  the  entire  coastwise 
and  overseas  tonnage  of  the  German  Empire,  and  they 
represent  three  times  the  entire  tonnage  of  France 
or  Norway.  In  short,  American  coastwise  navigation 
is  a  well-developed  and  prosperous  business,  with  free 
play  of  competition  among  its  participants. 

3.  Merchant  marine  a  national  question. — The  sub- 
ordinate role  of  American  shipping  in  the  world's  car- 
rying trade  has  been  held  up  to  us  as  a  national  re- 
proach. But  the  question  of  our  shipping  interests 
is  more  than  a  matter  of  sentimental  regret.  It  is 
one  of  national  concern,  vital  to  a  healthy  develop- 
ment of  our  foreign  trade.  It  is  futile  to  shed  tears 
over  past  glories  now  departed.  What  is  needed 
most  is  a  dispassionate,  thoro  study  of  present  condi- 
tions. The  true  significance  of  the  present  situation 
cannot  be  fully  grasped,  however,  without  a  brief  ref- 
erence to  certain  past  conditions  of  which  it  is  the  out- 
growth. 

4.  Beginnings  of  our  merchant  marine. — The  his- 
tory of  the  American  merchant  marine  has  been  often 
told,  and  we  need  only  refresh  our  memories  on  some 
of  its  chief  incidents  which  have  a  bearing  on  present 
problems. 

When  the  nation  was  born  the  merchant  marine  was 
in  a  sorry  plight.  Promising  developments  of  the  co- 
lonial period  had  been  checked  by  the  Revolutionary 


318  SHIPPING 

struggle,  and  in  1789  the  entire  fleet  registered  for 
foreign  commerce  amounted  to  only  123,893  tons. 
The  tariff  legislation  of  the  period  favored  our  ships 
by  a  reduction  of  duties  by  ten  per  cent  for  all  goods 
imported  in  American  vessels.  The  Napoleonic 
struggle  in  Europe  then  impending,  and  soon  to  break 
out  and  engage  the  energies  of  Europe  for  the  next 
decade  and  a  half,  stimulated  our  shipping.  Tonnage 
grew  to  667,107  in  1800.  Our  own  trade  had  been 
handled  almost  entirely  in  our  own  vessels,  and  we 
absorbed  a  large  carrying  trade  from  the  West  Indies 
to  Europe,  and  a  considerable  transshipment  trade 
arose. 

5.  Development  of  shipping  checked. — Things 
went  well  until  combatants  in  Europe  thru  their 
blockade  began  to  interfere  with  our  shipping.  Vainly 
we  protested.  Our  protests  unheeded,  we  were  led 
into  the  War  of  1812  of  glorious  memories  and  vague 
and  uncertain  results.  When  peace  settled  upon  the 
world  we  were  confident  of  the  strength  of  our  posi- 
tion. The  preferential  treatment  of  our  shipping  was 
abandoned,  and  commercial  treaties  removed  all  spe- 
cial advantages  we  had  enjoyed. 

Our  merchant  marine  developed  more  slowly.  By 
1850  it  had  reached  1,585,711  tons.  In  1830  our  ships 
carried  90  per  cent  of  our  commerce.  In  1850  on  the 
other  hand,  the  percentage  of  American  commerce 
carried  in  our  ships  had  decreased  to  72.5,  tho  the 
amount  and  value  had  somewhat  increased.  In  the 
meantime,  however,  the  fleets  of  foreign  countries,  es- 


AMERICAN  MERCHANT  MARINE  319 

pecially  Great  Britain,  had  increased  more  rapidly. 
Conditions  of  competition  were  changing.  Steam 
was  beginning  to  be  appHed  as  motive  power.  Great 
Britain  encouraged  the  building  of  steamships  by  a 
system  of  subsidies.  The  Cunard  Line  owes  its  be- 
ginning to  this  policy.  To  some  extent  the  United 
States  met  this  competition,  and  in  the  forties  several 
steamship  lines  were  subsidized.  In  1847  the  gov- 
ernment made  its  contract  with  the  Collins  Line  which 
became  a  worthy  rival  of  the  Cunard. 

6.  Shipping  begins  to  decline. — For  a  few  years 
there  was  a  splendid  development  of  American  ship- 
ping which  reached  its  climax  in  1855,  when  no  less 
than  583,450  tons  of  shipping  were  launched  from 
American  yards.  In  the  next  few  years  and  even 
before  the  Civil  War  there  was  a  marked  falling 
off.  This  followed  the  withdrawal  of  the  subsidies 
and  encouragement  which  the  government  had  given 
to  shipping.  The  Civil  War  merely  accelerated  the 
decline  of  American  shipping,  which  had  begun  six 
years  earlier.  Confederate  cruisers  between  1861 
and  1865  burned  or  appropriated  110,000  tons  of 
American  shipping,  and  drove  751,595  under  foreign 
(mainly  British)  colors.  Thus  the  seagoing  fleet, 
which  in  1861  amounted  to  2,496,894  tons  and  carried 
65.2  per  cent  of  our  exports  and  imports,  had  shrunk 
in  1866  to  1,387,756  tons,  which  carried  only  32.3  per 
cent  of  the  foreign  trade. 

7.  Recent  tendencies. — From  these  blows  Ameri- 
can shipping   has   never  recovered.     The  loss    was 

XV— 22 


320  SHIPPING 

steady  until  1898,  when  a  minimum  tonnage  of  726,- 
213  was  reached.  A  sHght  recoveiy  has  taken  place. 
The  lowest  point  was  reached  in  1900  when  only  8.2 
per  cent  of  our  foreign  trade  was  carried  in  American 
ships. 

The  decline  in  American  shipping  was  coincident 
with  the  rise  of  iron  and  steel  ships.  The  supremacy 
of  American  shipping  was  largely  based  upon  the 
abundance  of  raw  material  and  skill  in  ship  construc- 
tion. With  the  appearance  of  iron  materials  this  su- 
premacy passed  to  Great  Britain.  For  many  years 
British  shipyards  enjoyed  not  only  this  advantage,  but 
those  of  a  lower  wage  scale,  and  of  large  scale  pro- 
duction. 

During  the  past  thirty  years  the  question  of  stimu- 
lating the  merchant  marine  has  been  constantly  before 
the  public,  but  little  has  been  accomplished.  The  only 
positive  legislation  is  the  Postal  Aid  Act  of  1891,  un- 
der which  arrangements  are  made  with  American 
lines  for  the  carriage  of  mails,  at  rates  somewhat 
higher  than  contract  rates. 

8.  American  merchant  marine  comjjared  to  others. 
— It  is  a  rather  difficult  undertaking  to  measure  the 
comparative  size  of  the  merchant  marine  of  various 
countries,  as  the  statistics  are  not  made  up  on  the  same 
basis;  in  particular,  the  distinction  between  coastwise 
and  foreign  trade  tonnage  is  not  clearly  drawn  in  all 
coimtries. 

The  following  table,  prepared  from  "Lloyds 
Register,"   1914-15,   and   the  report   of  the   United 


AMERICAN  MERCHANT  MARINE 


321 


States  Commissioner,  1914,  shows  the  number  of  the 
net  and  gross  tonnage  of  steam  and  saihng  vessels 
of  over  one  hundred  tons  of  the  ten  leading  foreign 
nations  and  of  all  vessels  of  the  United  States  in  the 
foreign  trade  except  barges. 


Flag 

Number. 

Gross 

Tonnage 

Steam 

Uet  Tonnage 

Steam 

Sail 

Steam 

Sail 

Total 

British. 

10,123 

1,205 

20,523,706 

12,495,132 

521,343 

13,016,475 

German 

3,090 

'^8 

5,134,720 

3,116,968 

324,576 

3,441,544 

^Norwegian 

3,656 

;5as 

1,957,353 

1,173,036 

547,389 

1,720,405 

French 

1,025 

55X 

1,922,286 

1,099,914 

398.152 

1,498,066 

Japanese 

1,103 

1,708,386 

1,088,333 

1,088,333 

Dutch 

709 

97 

'  1,471,710 

910,123 

24,745 

934,868 

Italian 

637 

523 

1,430,475 

872,303 

237,821 

1,110,124 

Austro  Hungarlaa 

433 

•12 

1,052,346 

653,873 

3,373 

657,246 

Swedish 

J,088 

■378 

1,015,364 

501,382 

102,373 

604,044 

JRusslan 

747 

507 

'851,949 

500,352 

201,869 

702,221, 

ITDlted  States 

884 

472 

724,874 

446,522 

229,569 

676,091 

9.  United  States  steam  foreign  trade. — It  must  be 
noted  that  the  figures  for  the  ten  foreign  nations  in- 
clude both  foreign  and  coastwise  tonnage,  whereas 
those  for  the  United  States  include  only  vessels  reg- 
istered for  foreign  trade.  This  is  not  an  unfair  com- 
parison, as  in  foreign  nations  the  tonnage  employed 
in  coastwise  shipping  is  a  relatively  small  proportion 
of  the  entire  merchant  marine. 

The  following  is  a  table  which  gives  an  analysis  of 
the  United  States  steam  vessels  in  foreign  trade.  It 
clearly  shows  the  sad  state  in  which  the  American 
merchant  marine  is  at  the  present  time : 


322 


SHIPPING 

Classification 

No. 

Tonnage 

Over  20,000  tons 

1 

20,718 

10,000  to  20,000 

10 

120,198 

7,000  to  10,000 

10 

86,068 

5,000  to     7,000 

30 

181,214 

3,000  to     5,000 

34 

124,814 

1,000  to     3,000 

52 

104,796 

500  to     1,000 

58 

40,319 

100  to        500 

125 

30,066 

jCss  than  100  tons 

564 

884 

16,681 

Total 

724,874 

In  recent  years  conditions  have  changed  greatly, 
and  many  of  the  adverse  factors  which  have  prevented 
the  growth  of  an  American  merchant  marine  have 
either  been  ehminated  or  have  been  converted  into 
favorable  influences. 

10.  Awakening  interest. — Thus  the  interest  in  the 
internal  development  of  the  country  is  no  longer  all- 
absorbing,  and  no  longer  entirely  precludes  the  in- 
terest in  the  overseas  trade.  The  large  amounts  of 
capital  which  have  been  invested  in  American  shipping 
by  such  firms  as  the  Standard  Oil  Company,  United 
Fruit  Company  and  the  United  States  Steel  Products 
Company  show  the  new  trend  of  thought. 

The  development  of  our  steel  industry  has  brought 
the  price  of  ship  plates  somewhat  below  the  figure 
quoted  by  British  manufacturers.  This  should  bene- 
fit especially  the  manufacturers  of  standard  tramp 
steamers.  Furthermore,  new  railroad  lines  have  been 
constructed  which  act  as  feeders  of  our  shipping  in- 
dustry.    This  is  especially  true  of  coal-carrying  rail- 


AMERICAN  MERCHANT  MARINE  323 

roads.  Virginia  steam  coal  of  excellent  quality  can 
now  be  delivered  at  low  cost  at  Atlantic  seaports,  such 
as  Norfolk,  Newport  News,  and  Charleston.  This 
coal  might  be  able  to  compete  with  the  Australian, 
Japanese  and  Welsh  coal  which  now  controls  the  Far 
Eastern  market,  and  might  tend  to  reduce  the  return 
freight  rates  on  imported  nitrates,  as  well  as  on  cop- 
per, tin  and  iron  ores. 

Thus  the  time  seems  right  for  a  wholesome  develop- 
ment of  the  American  merchant  marine,  but  so  far 
the  genius  of  American  business  has  stayed  at  the 
seaboard. 

11.  Adverse  economic  conditions. — While  the  stage 
is  set  for  the  new  era  of  the  American  merchant  ma- 
rine, there  are  economic  conditions  which  even 
today  hamper  a  free  development  of  American  ship- 
ping. Here  we  must  recall  the  American  wage  scale 
for  officers  and  engineers  and  the  higher  requirements, 
due  to  more  stringent  navigation  laws,  applied  to 
American  shipping  as  compared  with  that  of  other 
countries,  in  regard  to  food,  crew  quarters  and  life- 
saving  equipment.  It  is  idle  to  scold  American  busi- 
ness of  today  for  a  lack  of  enterprise  on  the  ground 
that  it  refuses  to  enter  on  a  large  scale  into  merchant 
shipping.  This  is  not  the  case,  for  American  capi- 
tal is  invested  in  foreign  shipping  to  such  an  extent 
that  prior  to  the  European  war  the  total  foreign  ship- 
ping owned  by  American  interests  aggregated  be- 
tween one  and  one-half  and  two  million  tons. 

12.  Congressional  attempts  to  aid. — The  first  evi- 


324  SHIPPING 

dence  of  a  desire  of  Congress  to  encourage  American 
shipping  on  the  high  seas  was  the  insertion,  in  the 
Panama  Canal  Act  of  1912,  of  a  clause  authorizing 
the  naturalization  or  admission  to  American  registry 
and  flag  of  foreign  built  vessels  under  five  years  of 
age,  and  granting  the  free  entry  of  materials  used  in 
the  construction  and  equipment  of  ships.  This  clause 
reversed  the  national  policy  of  a  hundred  years.  In 
the  face  of  this  invitation,  two  years  went  by  without 
a  single  foreign  built  ship  seeking  the  American  flag. 
No  better  evidence  could  be  desired  of  the  higher  cost 
of  operation  imposed  by  American  policy  than  in  this 
fact. 

The  willingness  of  Congress  to  encourage  shipping 
was  further  proved  by  the  inclusion  in  the  present 
tariff  act  of  a  clause  allowing  a  discount  of  five  per 
cent  in  the  customs  duties  on  goods  imported  in  Amer- 
ican bottoms.  We  are  reminded  of  the  early  policy 
of  1789  which  had  produced  such  marvelous  results, 
but  administrative  interpretation  has  thus  far  made 
it  non-operative  and  its  legality  (in  the  face  of  our 
treaties)   is  before  the  Supreme  Court  upon  appeal. 

13.  New  conditions  caused  by  the  European  war. — 
The  European  War  created  new  conditions  and  op- 
portunities which  Congress  had  to  take  into  account. 
Thus,  on  August  18,  1914,  an  act  was  passed  which 
eliminated  the  five-year  age  limit  and  also  the  require- 
ment of  "fitness  to  carry  dry  and  perishable  cargo" ;  in 
other  words,  removed  all  the  modifications  of  the  Pan- 
ama Canal  clause  admitting  foreign  built  vessels  to 


AMERICAN  MERCHANT  MARINE  325 

American  registry.  Thus  the  doors  were  opened 
wider  still.  Ships  entering  American  registry  were 
allowed  to  retain  their  foreign  officers,  which  reversed 
the  policy  that  the  American  flag  could  fly  over  no 
ships  not  officered  by  Americans.  As  a  result  some 
hundred  and  seventy-five  to  two  hundred  steam  and 
sail  vessels  have  come  under  the  American  flag.  A 
large  percentage  of  the  boats  was  already  employed 
in  American  trade,  most  of  them  the  property  of 
American  citizens  before  their  admission  to  American 
registry.  The  motive  of  shipowners  in  transferring 
their  ships  to  American  registry  at  the  outset  of  the 
European  war  was  to  secure  the  protection  of  the  flag 
of  the  most  powerful  neutral.  The  flag  and  the  more 
favorable  marine  insurance  rates  constituted  a  gener- 
ous subsidy  to  these  unfortunate  ships  for  the  time 
being. 

If,  with  peace,  the  old  conditions  are  allowed  to 
revive,  the  ships  will  probably  be  transferred  back 
again  to  their  old  flags. 

The  government  also  established  a  War  Risk 
Bureau  to  insure  American  vessels  during  the  war. 
This  action  afforded  American  vessels  the  same  pro- 
tection in  the  war  zone  as  was  given  to  vessels  of 
other  nations  thru  the  establishment  of  similar  in- 
stitutions. 

Little  real  encouragement  can  be  found  in  the  re- 
sults of  the  Emergency  Act  of  1914,  for  in  spite  of  the 
great  inducements  resulting  from  war  conditions, 
there  came  a  significant  halt  in  seeking  American  reg- 


326  SHIPPING 

istry.  Fewer  and  fewer  vessels  applied  for  the 
American  flag. 

14.  Ship  Purchase  Bill. — Following  the  ship  regis- 
try act,  the  preferential  clause  of  the  tariff  and 
the  War  Risk  Bureau,  ambitious  projects  appeared 
to  develop  American  shipping  in  foreign  trade.  At 
that  juncture  a  severe  blow  was  struck  by  the  admin- 
istration's announcement  of  its  intention  to  operate 
ships  in  foreign  trade  under  government  control. 
Without  leaving  commercial  and  financial  enterprise 
time  to  recover  from  the  initial  shock  of  the  war,  the 
government  took  this  unfortunate  form  of  express- 
ing its  discontent  with  failure  of  private  shipping  con- 
cerns to  avail  themselves  of  the  momentous  oppor- 
tunity to  build  up  an  American  merchant  marine. 

Of  the  reasons  behind  the  Ship  Purchase  Bill  of 
late  1914,  E.  J.  Clapp  in  his  "Economic  Aspects  of 
the  War"  says: 

One  of  these  was  the  desire  to  relieve  the  distress  of  the 
cotton  states  and  to  start  a  movement  of  grain  which  for  a 
time  was  halted  by  lack  of  ships.  Another  reason  was  the 
desire  of  the  Democratic  Administration  to  call  into  life  an 
American  merchant  marine. 

The  bill  was  projected  in  August  and  September  of  1914. 
It  provides  for  a  corporation  in  which  the  American  govern- 
ment was  to  be  the  main  stockholder.  The  corporation  was 
to  have  fourteen  million  dollars  at  its  disposal,  available  for 
purchasing  ships. 

The  only  ships  that  could  have  been  bought  were 
the  interned  German  ships  in  our  ports.  They  were 
needed  to  cany  cotton  to  Germany,  not  yet  cut  off 


AMERICAN  MERCHANT  MARINE  327 

by  the  blockade.  But  the  British  objection  to  the 
purchase  of  German  ships  caused  the  administration 
so  to  veil  its  intentions  as  to  ships  and  services  that  it 
finally  appeared  as  if  the  administration  were  asking 
for  ships  from  un-namable  sources  to  institute  un- 
necessary and  superfluous  sei-vices.  The  bill  was 
defeated  in  February,  1915. 

15.  Seamen's  Law, — Another  unfavorable  govern- 
ment policy  was  introduced  by  the  enactment  of  the 
Seamen's  Law.  This  bill  had  once  before  passed  both 
the  House  and  the  Senate,  but  had  been  vetoed  by 
President  Taft  just  before  the  close  of  his  administra- 
tion. In  the  Presidential  campaign  of  1912  both 
parties  committed  themselves  to  the  passage  of  the 
Seaman's  Bill.  The  Seamen's  Bill  accordingly  was 
introduced  into  the  Sixty- third  Congi'ess  and  after 
almost  two  years  of  consideration  was  unanimously 
adopted  by  both  Houses  of  Congress.  It  became 
effective  for  American  vessels  November  4,  1915,  and 
has  applied  to  foreign  vessels  since  March  4,  1916. 
The  Attorney  General  has  decided  that  the  severe  re- 
quirements as  to  life-saving  equipment  and  the  man- 
ning of  such  equipment  do  not  apply  to  foreign  vessels 
owned  in  countries  with  which  the  United  States  still 
has  reciprocity  treaties.  American  shijDS  thereby  are 
placed  under  a  further  handicap.  Furthermore,  in 
order  to  insure  greater  safety  for  passengers,  the  law 
provides  that  American  ships  must  have  a  greater 
number  of  deck  hands,  rated  as  "able  seamen,"  than 
is  required  by  the  law  of  any  other  country. 


328  SHIPPING 

The  Seamen's  Law  furthermore  contains  the  stip- 
ulation that  75  per  cent  of  the  crew  in  all  depart- 
ments must  be  able  to  understand  any  order  given 
by  the  officers.  This  paragraph  prevents  the  em- 
ployment of  Asiatic  crews  on  American  vessels,  and 
thereby  makes  it  practically  impossible  for  American 
ships  to  compete  in  the  Pacific  with  Japanese  vessels 
on  which  the  Asiatic  crews  naturally  understand  the 
language  of  their  officers. 

16.  Loss  of  Pacific  trade. — The  Seamen's  Law  has 
had  the  result  of  turning  over  our  share  of  trans- 
Pacific  shipping  to  the  Japanese.  In  the  Third  Na- 
tional Foreign  Trade  Convention,  Captain  Dollar  of 
San  Francisco  stated  that  while  in  November,  1914, 
the  relation  of  American  to  Japanese  tonnage  in  the 
Pacific  was  45,315  net  tons  to  89,932  net  tons,  in 
November,  1915,  American  shipping  had  shrunk  to 
3,186  tons,  and  Japanese  had  increased  to  141,262 
tons. 

Several  months  after  the  Seamen's  Act  was  passed 
the  Korea  and  Siberia,  two  large  American  ships  of 
18,000  tons  each,  the  pride  of  the  Pacific  INIail  Steam- 
ship Company,  were  sold  to  the  International  Mer- 
cantile Marine  Company,  at  the  very  time  when  the 
commerce  of  our  country  was  crying  for  ships  as  mer- 
chant carriers  and  as  naval  auxiharies,  at  a  time 
when  ships  were  scarce  and  could  not  be  duplicated. 
The  two  ships  were  soon  sold  by  the  International 
Mercantile  Marine  Company  to  Japan,  thereby  mak- 
ing the  transfer  result  in  a  twofold  handicap  in  the 


AMERICAN  MERCHANT  MARINE  329 

American  struggle  for  the  trans-Pacific  trade.  This 
sale  furthermore  seriously  jeopardized  American 
prestige  in  the  far  East. 

17.  Purchase  of  the  Pacific  Mail. — Just  before  the 
Pacific  Mail  Company  was  about  to  sell  its  last 
steamer,  W.  R.  Grace  and  Company,  backed  by  the 
American  International  Corporation,  bought  up  the 
small  remains  of  its  fleet  in  order  to  prevent  a  total 
loss  by  a  firm  which  had  established  a  large  business 
and  created  a  good  name  for  itself.  Since  this  change 
of  ownership,  several  ships  which  have  been  purchased 
from  the  Royal  Dutch  West  India  Company,  have 
been  added  to  the  fleet  of  the  Pacific  Mail  Steamship 
Company.  This  addition,  however,  is  only  temporary, 
and  is  due  to  the  very  high  freight  rates  which  at  the 
present  time  more  than  compensate  for  the  increased 
expenses  imposed  by  the  Seamen's  Act.  According 
to  the  New  York  Times  of  August  27,  1916,  W.  R. 
Grace  and  Company  have  given  notice  that  a  return 
of  normal  conditions  will  compel  the  discontinuance 
of  their  service  unless  the  Seamen's  Law  is  replaced 
or  wisely  amended. 

18.  Status  on  the  Atlantic. — In  the  Atlantic  mat- 
ters do  not  stand  much  better,  but  here  the  causes 
which  bring  about  similar  results  are  entirely  difl*er- 
ent.  In  1902  a  praiseworthy  attempt  was  made  to 
establish  the  Stars  and  Stripes  on  a  large  scale  in  the 
Atlantic  trade.  In  that  year  the  International  Mer- 
cantile Marine  Company  was  formed. 

It  was   the  conception   of  two  Americans  who  had  long 


330  SHIPPING 

dreamed  of  merchant  marine  under  the  Stars  and  Stripes. 
These  men  were  Mr.  Bernard  Baker  of  Baltimore  who  con- 
trolled the  Atlantic  Transport  Line,  and  Mr.  Clement  A. 
Griscom  of  Philadelphia,  who  had  established  the  American 
Line.  They  succeeded  in  obtaining  Mr.  Morgan's  ear — and 
the  formation  of  the  International  Mercantile  Marine  Com- 
pany was  the  result.  It  operates  directly  only  six  vessels. 
It  is  mainly  a  holding  company.  Tho  chartered  in  the 
United  States,  the  ships  in  which  it  is  interested  sail  almost 
exclusively  und^r  foreign  flags,  namely,  the  British,  Belgian 
and  Dutch  flags. 

This  corporation  is  the  greatest  item  in  American 
shipping,  and  its  creation  led  to  one  of  the  most  inter- 
esting attempts  to  create  an  American  merchant  ma- 
rine. 

19.  British  restrictions. — The  attempt  to  Ameri- 
canize the  great  shipping  combine  led  to  developments 
that  brought  to  light  a  clause  in  a  contract  between  the 
British  government  and  the  International  Mercantile 
Marine  Company.  This  clause  was  imposed  on  Mr. 
Morgan  by  the  British  government  as  the  price  of 
permission  to  bring  British  shipping  companies  into 
an  American  combination: 

No  British  ship  in  the  association  or  any  ship  which  may 
hereafter  be  built  or  otherwise  acquired  for  any  British  com- 
pany included  in  the  association  shall  be  transferred  to  a 
foreign  registry  without  a  written  consent  of  the  president 
of  the  Board  of  Trade,  which  shall  not  be  unreasonably  with- 
held, nor  be  nor  remain  upon  a  foreign  registry.  Nothing 
shall  be  otherwise  done  whereby  any  such  ship  would  lose  its 
British  registry  or  its  right  to  fly  the  British  flag. 

The   Americans    also   promised   that   the   British 


AMERICAN  MERCHANT  MARINE  331 

government  should  always  be  represented  on  the 
Board  of  the  International  Mercantile  Marine  Com- 
pany. This  clause  frustrated  any  attempt  of  the 
American  International  Corporation  to  Americanize 
the  International  Mercantile  Marine  Company. 

20.  Present  role  of  Canadian  Shipping. — On  De- 
cember 31,  1914,  the  tonnage  of  all  vessels  on  the 
registry  books  of  the  Dominion  stood  at  932,422. 
Included  in  this  total  were  4,054  steam  vessels  with  a 
tonnage  of  744,783.  Twenty  years  earlier  Canada 
ranked  fifth  place  among  the  great  maritime  nations 
of  the  world;  in  1914,  she  came  in  tenth  place. 

While  even  this  is  a  fairly  respectable  showing  con- 
sidering the  population  of  Canada,  yet  her  vessels 
played  a  very  minor  role  in  the  total  carrying-trade 
of  the  world,  or  indeed  in  that  of  Canada  herself. 
Roughly,  the  same  small  percentage  represents  for 
both  Canada  and  the  United  States  the  extent  to 
which  their  own  ships  participate  in  the  transporting 
of  their  own  exports  and  imports.  For  the  period 
1900-1914  Canadian  vessels  carried  on  an  average 
only  about  10  per  cent  of  Canada's  imports  by  sea, 
and  about  12  per  cent  of  Canada's  overseas  exports. 
According  to  recent  estimates  Canada's  freight  bill 
paid  to  foreign  countries  during  this  same  period  was 
$60,000,000. 

21.  The  lake  fleet. — The  above  figures  include  ves- 
sels engaged  in  the  coasting  and  inland  trade  as  well 
as  in  the  overseas  trade.  It  has  already  been  ex- 
plained that  the  coasting  trade  of  Canada  is  open  to 


332  SHIPPING 

all  British  ships,  unless  they  are  foreign-built  British 
ships,  in  which  case  a  license  must  be  secured  and  a 
duty  of  25  per  cent  paid.  It  is  also  open  to  certain 
foreign  ships  under  treaty  rights,  and  may  be  thrown 
open  at  any  time  to  the  ships  of  any  nation  which 
grants  similar  privileges  to  Canadian  vessels. 

For  the  fiscal  year  1913-14  there  were  on  the  inland 
waters  above  Montreal  265  British  and  Canadian  ves- 
sels with  a  gross  tonnage  of  310,176,  nearly  all  of 
which  was  Canadian.  The  Canadian  fleet  here  comes 
into  competition  with  the  mercantile  fleet  of  the 
United  States  on  the  Great  Lakes.  Actual  and  open 
competition,  however,  is  restricted  by  the  coasting 
laws  of  both  countries  to  only  that  part  of  the  traflic 
which  passes,  or  which  can  be  made  to  pass,  from  a 
port  in  one  country  directly  to  a  port  in  the  other, 
either  because  the  goods  so  shipped  are  designed  for 
consumption  in  the  latter  country,  or  can  pass  in 
transit  thru  that  country  on  favorable  terms.  In 
comparison  with  the  United  States  fleet  the  Canadian 
mercantile  fleet  is,  of  course,  small;  but  it  has  been 
steadily  growing  and  in  the  typical  year  1913  of  the 
strictly  competitive  traffic  it  secured  somewhat  the 
larger  share  in  proportion  to  the  relative  carrying 
capacities  of  the  two  fleets.  This  inland  fleet,  there- 
fore, presents  no  particular  problem  for  Canada. 
The  Dominion  may  note  perhaps  that  after  the  war 
there  will  be  as  great  a  scarcity  of  tonnage  on  the 
lakes  as  on  the  ocean.  Over  one  hundred  vessels  were 
transferred  from  the  lakes  to  the  ocean  service,  and 


CANADIAN  MERCHANT  MARINE  333 

construction  of  lake  vessels  in  Canadian  yards  practi- 
cally ceased. 

22.  Seagoing  coasting  trade. — In  the  seagoing 
coasting  trade,  one  point  needs  to  be  noted.  In  the 
calendar  year  1916,  there  were  ti'ansf erred  from  the 
Canadian  Register  42  vessels  with  an  aggregate  ton- 
nage of  25,834.  The  chief  cause  of  this  transference 
was  what  was  claimed  to  be  an  unfair  provision  in 
the  Canadian  Shipping  Act,  requiring  coasting  ves- 
sels of  over  100  tons  burdens  to  carry  certificated 
masters  and  mates.  No  such  conditions  were  exacted 
by  the  legislation  of  Newfoundland,  Barbadoes, 
United  Kingdom,  etc.,  and  the  tendency  was  becom- 
ing general  to  seek  registrj^  under  another  country. 
The  United  States  in  addition  now  afforded  a  refuge, 
as  the  old  law  against  registering  foreign  ships  had 
been  repealed,  and  in  this  same  year  fourteen  Canadian 
ships  were  secured. 

This  condition  led  to  a  considerable  demand  in 
Canada  for  the  enlargement  of  the  area  for  which 
coasting  certificates  were  issued.  The  earlier  law  re- 
stricted a  coasting  voyage  roughly  to  a  voyage 
between  any  port  in  Canada  and  any  port  in  America 
on  either  coast  north  of  5  degrees  north  latitude. 
As  in  normal  pre-war  years  this  coasting  trade  was 
proving  barely  profitable,  and  as  it  was  desired  to 
enter  the  more  remunerative  coasting  trade  of  South 
America,  an  amendment  was  passed  in  1915,  extend- 
ing the  southern  limit  of  a  coasting  voyage  to  40 


334  SHIPPING 

degrees  south  latitude.  This  amendment  will,  it  is 
hoped,  tend  to  check  the  loss  of  Canadian  ships  from 
the  Canadian  register. 

23.  Dry  docks  and  the  dry  dock  subsidy  policy. — 
One  of  the  ways  in  which  Canada  has  encouraged  this 
industry  has  been  by  the  building  and  subsidizing  of 
dry  docks.  Under  the  Act  passed  in  1910,  dry  docks 
are  divided  into  three  classes  according  to  size  and 
cost — varying  from  400  foot  length,  3,500  ton  lifting 
power  and  under  one  and  a  half  million  dollar  to  900 
foot  length,  25,000  ton  lifting  power  and  four  million 
dollar  cost — and  subsidies  are  paid  in  each  case  of 
from  3  to  3/^  per  cent  of  the  cost  of  construction  for 
from  20  to  35  years.  Plans  of  course  must  be  ap- 
proved and  construction  supervised  by  government 
engineers.  As  a  result  there  has  been  a  rapid  exten- 
sion of  such  ship-building  and  ship -repairing  facilities 
in  Canada. 

On  the  Great  Lakes  where,  for  a  number  of  j^^ears, 
many  large  modern  vessels  have  been  turned  out, 
there  are  dry  dock  facilities  at  Toronto,  Colhngwood 
and  Port  Arthur.  At  present  the  largest  dry  dock 
on  the  Great  Lakes  is  the  one  at  Port  Arthur,  which 
has  a  usable  length  of  679  feet.  Extension  of  the 
facilities  at  Halifax,  St.  John  and  Quebec  is  now 
taking  place  on  a  large  scale.  At  Sydney,  the 
hub  of  the  iron  and  steel  industry  in  Nova  Scotia, 
a  strong  company  headed  by  Sir  Henry  Pellatt  and 
backed  by  British  capital  was  formed  a  few  years 


CANADIAN    MERCHANT    MARINE  335 

ago  to  build  a  large  dry  dock  and  shipbuilding  estab- 
lislinient,  but  no  steps  have  since  been  taken  other 
than  to  secure  a  large  bonus  from  the  city. 

On  the  Pacific  Coast  where  shipbuilding  has  re- 
ceived an  impetus  in  the  last  few  years  owing  to  the 
rapid  development  of  British  Columbia,  several  large 
docks  have  been  built  or  projected.  The  government 
dry  dock  at  Esquimalt  has  a  usable  length  of  430 
feet.  At  Vancouver,  a  dock  of  550  foot  length  and 
15,000  tons  lifting  capacity,  which  has  been  projected 
for  some  years,  is  now  in  process  of  construction,  while 
at  Prince  Rupert  the  Grand  Trunk  Railway  is  build- 
ing a  still  larger  floating  dock  with  a  length  capacity 
of  600  feet  and  a  lifting  capacity  of  20,000  tons. 

Finally,  the  most  modern  and  largest  floating  steel 
dry  dock  in  Canada  today  is  that  owned  by,  and 
operated  in  connection  with  a  shipyard  and  repair 
plant  of  the  Canadian  Vickers,  Limited,  Montreal. 
With  a  length  of  600  feet  and  a  lifting  capacity  of 
25,000  tons,  it  has  already  proved  of  great  service^ 
especially  during  the  present  war. 

24.  Another  form  of  government  aid. — The  Cana- 
dian government  also  makes  use  of  another  typical 
method  of  state-aid  to  shipping,  that  of  postal  sub- 
ventions. Each  year  over  two  and  a  half  million 
dollars  are  paid  to  various  steamship  companies  for 
the  transportation  of  mails  on  certain  definite  routes, 
especially  between  Canada  and  the  mother-country  or 
other  parts  of  the  Empire.  The  objects  are  to  pro- 
vide regular  and  more  rapid  service,  to  encourage  as. 

XV— 23 


336  SHIPPING 

many  direct  sailings  from  Canadian  ports  as  pos- 
sible and,  as  a  consequence,  to  foster  Canadian  trade. 
In  some  cases  it  is  provided  that  the  rates  from 
Canadian  ports  to  England  shall  not  exceed  those 
from  New  York,  and  that  discrimination  shall  not 
be  made  against  Canadian  merchants  or  shippers,  or 
against  immigi-ants  to  Canada  or  against  any  Cana- 
dian port. 

Tho  two-thirds  of  the  officers  and  crew  must  be 
British  subjects,  there  is  no  provision  requiring  the 
ships  to  be  Canadian  built.  Instead,  then,  of  directly 
aiding  the  shipbuilding  industry,  these  subventions 
have  an  indirect  influence  only,  increasing  the  tonnage 
calling  at  Canadian  ports  and  making  shipping  more 
profitable  thru  the  building  up  of  Canadian  trade. 
25.  Discrimination  against  a  Canadian  marine. — It 
is  claimed  that  one  result  of  recent  legislation  is 
to  make  Canadian  owners  pay  more  than  foreigners 
for  Canadian-built  tonnage.  Material  entering  into 
the  construction  of  a  Canadian  vessel  is  subject  to 
duties  varying  from  27^^  to  37/4  per  cent  for  the 
heavier,  and  to  higher  rates  for  special  and  lighter 
parts.  The  present  drawback  in  the  case  of  vessels 
built  for  Canada  is  65  cents  per  gross  ton  for  non- 
classed  craft,  75  cents  for  ships  classed  for  7  years, 
85  cents  for  ships  classed  for  9  years,  and  $1.15  for 
the  fifteen  year  class.  The  effect  of  these  drawbacks, 
it  is  claimed  by  builders,  is  insignificant,  and  certainly 
not  enough  to  offset  the  advantage  given  to  foreign 
owners  by  the  new  order  which  enables  a  vessel  to  be 


CANADIAN    MERCHANT    MARINE  337 

built  in  Canada  for  a  foreigner  at  a  lower  cost  than 
for  a  Canadian.  Especially  is  this  felt  to  be  a  hard- 
ship at  the  present  time  when  an  attempt  is  being 
made  to  estabhsh  a  nucleus  for  a  larger  ocean-going 
Canadian  merchant  marine. 

It  is  to  be  noted  also  that  at  present  British-built 
vessels  plying  the  Great  Lakes  in  competition  with 
the  Canadian  built  boats  retain  British  registration, 
and  thus  come  into  Canada  practically  duty  free. 
On  the  other  hand  if  the  same  vessels  were  bought 
by  Canadians  and  entered  in  Canada  a  duty  of  25 
per  cent  on  the  hull,  rigging,  machinery,  etc.,  would 
have  to  be  paid. 

26.  Proposals  of  the  Dominion  government. — 
Apart  from  the  dry  dock  subsidies,  the  postal  sub- 
ventions and  the  drawback  regulations  previously 
mentioned,  no  definite  steps  have  been  taken  by  the 
government  at  Ottawa  to  build  up  a  Canadian  mer- 
cantile marine. 

In  April,  1916,  the  Minister  of  Trade  and  Com- 
merce gave  to  Parliament  a  comprehensive  review 
of  the  whole  subject  and  asked  for  suggestions  from 
all  parties  in  the  House.  Outlining  the  causes  which 
had  given  rise  to  the  serious  scarcity  of  tonnage  he 
showed  how  it  had  been  impossible  for  the  government 
to  solve  the  problem  by  chartering  vessels  or  by  con- 
trolling rates.  Increasing  the  tonnage  was  the  only 
solution  of  the  emergency  problem  and  that  took 
time.  It  was  even  more  important  that  shipbuilding 
in  Canada  should  be  put  on  a  permanent  basis. 


338  SHIPPING 

27.  Suggested  form  of  government  aid. — The  min- 
ister stated:  (1)  that  a  country  of  such  large  and 
increasing  productive  capacity  as  Canada  occupies 
an  undesirable  position  if  it  does  not  have  a  very  con- 
siderable commercial  tonnage  for  its  own  use;  (2) 
that  commercial  tonnage  taken  year  in  and  year  out 
is  a  profitable  investment  for  a  country;  and  (3) 
that  the  matter  could  not  be  left  entirely  to  corporate 
and  private  enterprise. 

He  then  outlined  three  possible  forms  of  govern- 
ment aid,  condemning  the  tonnage  construction  sub- 
sidy policy  and  the  policy  adopted  recently  by  the 
United  States,  and  tending  to  favor  for  Canada  a 
scheme  similar  to  that  proposed  by  the  Chamber  of 
Commerce  of  New  York  for  the  United  States.  This 
scheme,  it  will  be  remembered,  proposed  to  set  up  a 
commission  exercising  general  oversight  over  the  ves- 
sels to  be  built  under  the  plan,  and  having  power  to 
enter  into  contracts  with  builders  of  ships  under 
which  the  latter  would  be  allowed  the  difference  be- 
tween the  cost  of  construction  in  Canada  and  in 
European  ports.  Also  to  enter  into  contracts  with 
shipowners,  when  the  ships  were  built,  guaranteeing 
them  during  the  life  of  the  ship  the  difference  in  cost 
of  operation  under  the  Canadian  and  under  a  Euro- 
pean flag. 

28.  Other  proposals. — This  statement  by  a  mem- 
ber of  the  government  looked  promising.  But  the 
matter  dropped  and  nothing  was  done. 

A  few  months  later  another  Cabinet  minister  sug- 


CANADIAN   MERCHANT   MARINE  339 

gested,  in  an  interview,  that  the  probable  solution  of 
the  problem  of  securing  a  direct  service  between 
British  Columbia  and  the  Canadian  Atlantic  ports 
which  the  people  of  the  former  province  so  earnestly 
desired  was  for  the  Dominion  government  to  order 
the  building  of  two  suitable  vessels  in  British  Colum- 
bia and  then  place  these  public-owned  steamers  on 
this  route.  This  has  not  been  done.  Unofficial  state- 
ments have  been  made  that  after  the  European  war 
the  Dominion  government  would  establish  a  state- 
owned  line  of  trans-Atlantic  steamers.  Such  a 
scheme  will  doubtless  find  strong  support  from  some 
members  of  the  government.  Much  depends  upon 
the  report  of  the  commission  now  investigating  the 
Canadian  railway  situation. 

REVIEW 

How  has  the  development  of  shipping  in  the  coastwise  trade 
differed  from  that  in  overseas  commerce? 

How  does  the  American  merchant  marine  compare  with  that 
of  other  countries  ? 

What  economic  conditions  are  favorable  to  shipping  growth  ? 

Describe  the  Ship  Registry  Act  and  the  War  Risk  Bureau? 
What  effect  have  they  had? 

What  was  the  Ship  Purchase  Bill  and  what  was  its  fate  ? 

What  is  the  Seamen's  Act  and  what  has  been  its  effect  upon 
American  shipping  in  the  Pacific  trade? 

What  was  the  purpose  of  forming  the  International  Mercantile 
Marine  Company?  How  does  it  operate  and  what  has  been  its 
success  ? 

Outline  the  history  of  Canadian  shipping.  Discuss  the  present 
role  played  by  the  Canadian  merchant  marine  in  both  coasting 
and  overseas  trade. 

What  encouragement  does  the  Dominion  government  give  to 
Canadian  shipping? 

What  proposals  for  a  national  shipping  policy  have  been  made  ? 


CHAPTER  IX 

SHIPPING  PROBLEMS  IN  WAR  TIME 

1.  War  problems  displace  peace  conditions. — At 
the  beginning  of  1917  the  outlook  for  the  American 
merchant  marine  was  blurred  and  confused.  Whether 
the  measures  which  had  been  adopted  would  promote 
shipbuilding  in  any  great  degree  was  at  least  dubious. 
Questions  of  costs  of  construction  and  operation  were 
gravely  weighed.  Now  these  questions  have  been 
brushed  aside  by  the  imperative  need  for  ships.  The 
exigencies  of  warfare  require  results,  and  a  nation  at 
war  does  not  stop  to  count  the  costs. 

The  entrance  of  the  United  States  in  the  World 
War  in  April,  1917,  did  not  find  the  industries  of  the 
country  wholly  unprepared  for  the  emergency.  For 
more  than  two  and  a  half  years  ever  increasing  quan- 
tities of  munitions  and  supplies  had  poured  out  of  our 
great  seaports;  agriculture  and  industry  had  largely 
adapted  themselves  to  the  situation.  The  new  emer- 
gency meant  additional  strain  upon  their  capacity; 
but  the  ground  had  been  broken  and  the  foundation 
was  laid. 

But  this  is  not  the  case  in  the  shipbuilding  industry. 
Before  the  war  this  important  branch  of  American  en- 
terprise had  been  sadly  neglected  so  that  it  appeared 

340 


SHIPPING  PROBLEMS  IN  WAR  TIME       341 

like  a  pigmy  beside  its  big  brothers,  the  iron  and  steel 
industries,  and  the  war  itself  had  not  given  it  the  stim- 
ulus which  other  branches  had  experienced.  The  dec- 
laration of  war  meant  more  for  American  shipping 
and  shipbuilding  than  for  any  other  industry. 

2.  Demand  for  ships. — For  no  other  product  of 
human  energy  had  the  demand  grown  as  a  result  of 
the  war  to  anywhere  near  the  extent  as  it  had  for  ships. 
The  realization  of  this  fact  which,  by  now,  has  become 
the  common  property  of  the  American  people  could 
not  fail  to  stir  into  life  the  potential  forces  of  this  coun- 
try as  a  builder  of  ships.  We  saw  in  the  previous 
chapter  that  the  year  1916,  tho  full  of  splendid  oppor- 
tunities had  failed  to  awaken  the  dormant  energies, 
lulling  them  rather,  as  it  were,  with  such  narcotics  as 
threatening  government  ownership  and  a  Seamen's 
Bill. 

The  entry  of  America  into  the  war  changed  all  this 
at  an  instant ;  the  spell  was  broken  immediately.  The 
two  main  deficiencies  had  been  lack  of  men  and  scar- 
city of  money.  The  empty  purse  of  the  shipyard  own- 
ers was  filled  as  never  before  out  of  Uncle  Sam's  cor- 
nucopia. The  youth  of  the  land  that  in  former  times 
had  despised  or  dreaded  the  life  of  the  sea  now, 
prompted  by  patriotic  enthusiasm,  rapidly  filled  the 
ranks  of  navy,  naval  reserve,  and  merchant  marine 
and  swelled  their  numbers  to  hitherto  unheard  of 
heights. 

There  is  something  of  romance  in  this  story  of  a 
hundred  million  people  in  a  billion  dollar  land  sud- 


342  SHIPPING 

denly  remembering  that  "Old  Glory"  once  had  flown 
from  mastheads  in  every  port  of  the  globe, — this  met- 
amorphosis of  dreary  wastes  of  marshes  into  humming 
shipyards  turning  out  wooden  and  steel  ships  in  rapid 
strides,  the  transformation  of  landlubbers  into  sturdy 
seamen,  and,  above  all,  the  change  of  front  which  took 
place  in  the  consciousness  of  a  whole  people. 

3.  Operations  of  the  Sliijjping  Board. — The  organ- 
ization by  means  of  which  this  wonder  is  being  accom- 
plished, the  United  States  Shipping  Board  (with  its 
executive  adjunct,  the  Emergency  Fleet  Corpora- 
tion) ,^  had  been  created  in  1916,  but  it  could  barely  be 
said  to  have  come  into  existence  until  the  necessities 
of  war  rendered  drastic  action  unavoidable.  The  first 
important  step  was  the  seizure  of  ninety-one  German 
ships  of  an  aggregate  of  594,696  gross  tons.  Then,  on 
May  15th,  a  generous  Congress  appropriated  over 
$400,000,000  to  be  spent  by  the  Shipping  Board  for 
the  building  of  merchant  ships.  It  was  announced 
that  on  July  13,  1917,  contracts  had  been  let  for  348 
wooden  ships  of  1,218,000  tons,  to  cost  $179,000,000, 
and  for  77  steel  ships  of  642,800  tons,  to  cost  $101,- 
660,356.  In  addition  to  this,  two  government  plants 
were  to  be  erected  for  the  construction  of  steel  ships. 

A  further  step  was  taken  in  August,  1917,  when 
the  Emergency  Fleet  Corporation  requisitioned  all 
vessels  under  construction  in  the  shipyards  of  the 
United  States  of  2,500  tons  deadweight  capacity.  By 

1  Organized  April  16,  1917,  incorporated  with  a  capital  of  $50,000,000 
under  the  laws  of  the  District  of  Columbia,  now  employs  about  1,000 
employes  in  16  oiBces  in  Washington  and  seaport  cities. 


SHIPPING  PROBLEMS  IN  WAR  TIME       343 

this  act  the  United  States  acquired  a  total  number  of 
403  vessels  with  an  aggregate  dead  weight  tonnage  of 
over  2,000,000  tons.  More  money  was  needed  and  an 
estimate  submitted  to  Congress  for  a  shipbuilding 
program  calling  for  1,270  ships  of  7,968,000  tons. 

The  estimates  of  the  entire  cost  were  given  as  fol- 
lows: 

Contracts  already  let,  433  ships,  1,919,200  tons,  $285,000,- 
000.  Contracts  ready  to  let,  452  ships,  2,968,000  tons,  $455,- 
500,000.  Under  negotiation,  237  ships,  1,281,000  tons, 
$194,000,000.  One  hundred  and  fifty  miscellaneous  vessels, 
1,800,000  tons,  $300,000,000.  Construction  of  government 
owned  fabricating  yards,  $35,000,000.  Commandeering  will 
cost  $515,000,000  and  the  purchase  of  ships  $150,000,000, 
and  for  commandeering,  $250,000,000.  The  board  now  de- 
sires from  Congress  authorization  to  spend,  for  construction, 
$719,500,000;  for  commandeering,  .$265,000,000,  and  for 
purchases,  $150,000,000. 

The  first  annual  report  of  the  United  States  Ship-- 
ping  Board  contains  the  following  statement  of  ap- 
propriations available  to  the  Board  and  to  the  Emer- 
gency Corporation  for  the  construction,  purchase, 
requisitioning  and  operation  of  vessels : 

Amounts  Amounts         Amounts  to  be 

Purpose  of  Appropriation  Authorized  Appropriated      Appropriated 

Ship  Construction    $1,284,000,000  $550,000,000  $734,000,000 

Shipyard    Plants    35,000,000  35,000,000        

Requisitioning  of   Ships 515,000,000  350,000,000  165,000,000 

Purchase  of  Ships 150,000,000  150,000,000        

Operation  of  Ships 5,000,000  5,000,000        


Total    $1,939,000,000      $1,090,000,000      $899,000,000 

The  apparent  delay  in  America's  shipbuilding  pro- 
gram caused  the  appointment  of  a  Senate  Committee 


344  SHIPPING 

to  conduct  a  sweeping  inquiry  into  the  activities  of  the 
Shipping  Board  and  the  actual  status  of  American 
shipping  and  shipbuilding.  Much  valuable  informa- 
tion has  been  brought  to  light  "as  a  result  of  this  inves- 
tigation. Thus  the  following  statement  which  enu- 
merates the  tonnage  contracted  for  up  to  December 
21st  was  elicited  from  Chairman  Hurley: 

No.  of  No.  of 

contracts  vessels  Tonnage 

April    1  12  42,000 

May 9  76  854,200 

June 20  137  646,900 

July    24  138  591,800 

August 25  110  424,300 

September 12  185  1,142,500 

October    6  114  934,200 

November 46  192  1,054,400 

December 4  35  326,800 

Total    147  999  5,917,100 

On  January  4,  1918,  a  Washington  dispatch  re- 
ported that  an  appropriation  of  $82,000,000  was  asked 
for  the  extension  of  shipyards  and  for  providing 
housing  facilities  for  workmen.  This  request  if 
granted  will  bring  the  total  amount  of  funds  placed 
at  the  disposal  of  the  Board  to  $2,018,000,000. 

4.  New  shipyards  necessary, — So  much  about 
plans ;  now  as  to  accomplishments.  It  is  one  thing  for 
Great  Britain  to  build  two  or  three  million  tons  a  year 
and  another  thing  for  this  country  to  build  a  greater 
or  even  a  like  amount.  Great  Britain  is  the  ship- 
builder of  the  world.  Her  yards,  grown  strong  as 
the  cradle  of  the  world's  mightiest  battle  fleet,  were 
accustomed  to  turn  out  between  60  and  70%  of  all 
ships  built  anywhere.  These  yards  had  a  normal  ca- 
pacity of  approximately  2,000,000  tons  gross.     The 


SHIPPING  PROBLEMS  IN  WAR  TIME       345 

United  States  had  never  turned  out  more  than  615,- 
000  tons  gross  in  one  year  and  that  was  in  days  when 
shipbuilding  in  America  was  a  flourishing  industry. 
The  total  output  of  American  yards  in  recent  years 
had  been  as  follows : 

Fiscal  year  ending 

June  30th  No.  Tonnage 

1913 1435  346,155  gross  tons 

1914 1151  216,250 

1915 1157  225,122 

1916 937  325,413 

To  raise  this  figure  to  8,000,000  tons  gross  is  indeed 
a  bold  undertaking.  The  diihculty  is  immeasurably 
increased  by  the  extraordinary  demand  which  the 
Navy  Department  is  making  on  the  yards  of  the  coun- 
try. Chairman  Hurley  estimates  that  the  navy  prog- 
ress is  the  equivalent  in  dollars,  and  therefore  in  ship- 
building eiFort,  of  the  construction  of  2,500,000  tons 
of  merchant  shipping.  Such  a  program  meant  the 
virtual  monopolization  of  practically  70%  of  the 
eighteen  most  prominent  yards  of  the  country.  New 
yards  had  to  be  created ;  old  yards  had  to  be  enlarged 
and  improved.  The  contracts  of  the  Emergency  Fleet 
Corporation  have  been  let  to  110  yards  of  which  36 
existed  January  1,  1917,  and  74  have  been  created 
since.  Besides  this  the  vessels  being  built  in  22  yards 
have  been  requisitioned. 

5.  Materials  needed. — The  question  of  materials  is 
important.  As  far  as  steel  is  concerned  little  is  heard 
of  inabilitv  to  make  deliveries.    Of  course,  the  steel 


346  SHIPPING 

industry  is  already  straining  every  nerve  and  the  un- 
filled orders  of  the  United  States  Steel  Corporation 
have  greatly  increased  during  the  last  six  months. 
The  steel  ships  planned  will  require  3,500,000 
tons  of  steel,  wliich  after  all  is  but  10%  of  this  coun- 
try's output  and  with  proper  priority  rulings  the  dif- 
ficulties of  setting  this  quantity  free  for  ships  ought 
not  to  be  insurmountable.  Somewhat  less  cheerful  is 
the  outlook  for  wood.  Ships  cannot  be  built  out  of 
unseasoned  wood.  One  of  the  chief  reasons  for  the 
delay  in  carrying  out  the  wooden  ship  plan  has  been 
the  inability  to  secure  all  the  lumber  which  had  been 
promised.  Admiral  Bowles  stated  in  December, 
1917,  that  only  30%  of  the  lumber  required  for  the 
yards  on  the  Atlantic  and  Gulf  Coast  had  been  deliv- 
ered and  about  40%  of  the  Pacific  Coast  require- 
ments. 

6.  Labor  available  not  adequate. — But  the  great- 
est difficulty  of  all  is  the  labor  problem.  Before  the 
war  the  domestic  yards  of  this  country  employed 
perhaps  30,000  skilled  laborers.  Now  between  400,- 
000  and  500,000  workmen  are  necessary  to  carry 
out  the  plans  of  our  Shipping  Board.  In  order  to  re- 
cruit this  army  the  Emergency  Fleet  Corporation  has 
instituted  an  Industrial  Service  Department  which 
in  cooperation  with  the  Department  of  Labor  is  as- 
sisting shipbuilders  in  the  employment  of  suitable 
labor  and  is  initiating  an  extensive  system  of  voca- 
tional training  with  the  purpose  of  adapting  allied 
trades  and  unskilled  labor  for  service  in  shipyards. 
The  Department  of  Labor  is  expected  to  cover  the  en- 


SHIPPING  PROBLEMS  IN  WAR  TIME       347 

tire  continent  with  a  network  of  labor  exchanges 
which  will  recruit  and  transfer  workers  from  one  sec- 
tion to  another  and  eliminate  the  chaotic  condition 
which  still  exists  today.  The  number  of  men  em- 
ployed in  merchant  shipbuilding  increased  from  50,- 
000  in  July,  1917,  to  about  145,000  in  January,  1918. 
But  at  least  a  quarter  of  a  million  still  remain  to  be 
recruited  to  meet  the  plans  of  the  Shipping  Board. 

It  is  to  be  hoped  that  these  difficulties  may  be  over- 
come, but  it  would  be  blindness  if  we  failed  to  rec- 
ognize their  existence. 

7.  Operating  the  ships. — Xot  less  important  than 
problems  of  construction  are  those  of  operation.  A 
ship  is  a  delicate  mechanism  and  requires  careful  and 
skilled  handling.  It  has  been  estimated  that  the  ships 
already  planned  will  call  about  200,000  officers  and 
seamen  into  service.  To  man  only  the  ships  which 
await  completion  in  1918  an  army  of  6,400  watch  offi- 
cers, 6,400  engineers,  24,000  sailors  and  an  equal  num- 
ber of  firemen,  12,000  coal  passers,  9,600  oilers  and 
water  tenders,  and  16,000  cooks  and  stewards  will 
have  to  be  recruited.  The  coastwise  fleet  will  to  a 
large  extent  be  the  nursery  for  the  deck  and  engineer 
officers.  It  will  have  to  furnish  the  nucleus  of  the  offi- 
cers who  are  to  navigate  the  new  tonnage  as  it  did  that 
of  the  crews  which  today  operate  the  more  than  one 
hundred  German  and  Austrian  ships  which  were 
seized  and  pressed  into  service  as  transports,  etc.  In 
addition  to  this,  nautical  schools  all  along  the  Atlan- 
tic and  Pacific  Coasts  are  training  eager  youths  from 
every  state  of  the  Union.    The  Shipping  Board  in  its 


348  •  SHIPPING 

first  annual  report  of  December  1,  1917,  tells  of  27 
navigation  schools  in  existence. 

8.  Government  or  private  operation. — The  next 
question  is  the  great  alternative  of  government  or  pri- 
vate operation.  Future  action  is  foreshadowed  by  the 
manner  in  which  the  government  is  dealing  with  the 
slightly  over  2,878,000  tons  of  American  ocean-going 
ships  of  over  2,500  tons  deadweight  capacity  which  on 
October  15th  were  requisitioned  by  the  Shipping 
Board.  These  vessels  are  chartered  by  the  govern- 
ment at  rates  which  range  from  $5.75  per  ton  for 
freight  vessels  to  $11.50  per  ton  for  fast  passenger 
boats.  These  rates  are  substantially  below  those  that 
are  obtainable  in  the  open  market. 

After  the  charter  rate  for  the  vessel  has  been  estab- 
lished the  freight  rate  will  have  to  be  fixed.  Both 
these  regulations  belong  to  the  office  of  the  Chartering 
Commission  which  the  Shipping  Board  appointed 
in  September,  1917.  The  rates  before  the  war,  a 
high  war  rate  and  the  rate  which  at  this  writing  the 
Chartering  Commission  is  expected  to  announce  are 
given  below: 

Before  War         High  War  Rate     New  Rate 

Cotton,  per  100  lbs $0.35  $8.00  $3.00 

Wheat,  per  quarter 50  9.00  4.50 

General  Cargo,  per  ton 10.00  160.00  75.00 

Chartered  tonnage  per  ton  per  month.  .           .60  15.00  11.00 

It  must  be  said,  however,  that  the  new  rates  are  as 
yet  entirely  conjectural,  no  official  announcement 
upon  the  subject  having  thus  far  been  made. 

The  latest  development  is  indicated  in  an  announce- 


SHIPPING  PROBLEMS  IN  WAR  TIME       349 

ment  made  by  Chairman  Hurley  under  date  of  Janu- 
ary 13,  1918.  This  comprises  a  reorganization  and 
expansion  of  the  "Division  of  Operation"  of  the  Ship- 
ping Board  so  as  to  place  representatives  in  London, 
Paris  and  Rome  and  branches  in  nearly  all  important 
Atlantic  coast  ports.  The  purpose  is  to  render  more 
effective  control  of  American  shipping  and  to  insure 
complete  cooperation  with  the  shipping  of  the  allies. 
This  is  said  to  be  a  direct  result  of  the  latest  inter- 
allied conference  at  Paris. 

Summing  up  this  story  of  the  return  of  the  Amer- 
ican merchant  marine  we  are  giving  below  the  growth 
of  our  tonnage.  Previous  to  the  outbreak  of  the  war, 
figures  compiled  by  the  government  gave  the  total 
gross  register  tonnage  of  all  craft  over  100  tons  under 
the  American  flag  at  8,600,000.  Of  these  about 
4,000,000  were  trading  between  ports  on  the  Atlan- 
tic coast.  Gulf  of  Mexico  and  Pacific  coast;  about 
3,000,000  on  the  Great  Lakes.  That  leaves  about 
1,600,000  gi'oss  tons  for  foreign  trade.  Since  then 
many  foreign  vessels  have  been  transferred  to  Amer- 
ican registry,  amounting  altogether  to  about  500,- 
000  gross  tons.  A  total  of  at  least  400,000  gross 
tons  was  built  since  the  war,  about  600,000  of  German 
and  Austrian  vessels  were  seized  so  that  at  the  present 
time  the  ocean-going  tonnage  under  the  American  flag 
is  probably  not  less  than  3,000,000  gross  tons.  In 
addition  to  this  many  of  the  coastwise  vessels  are 
potentialities  for  the  foreign  Gervice. 

9.  American  shipping  as  part  of  world's  shipping. 


350  SHIPPING 

— The  deeper  meaning  of  "America's  Great  Adven- 
ture in  Ships"  can  be  grasped  only  when  we  conceive 
the  shipbuilding  program  of  this  country  in  connec- 
tion with  the  shipping  situation  thruout  the  world.  As 
far  as  shipping  is  concerned,  it  is  practically  out  of 
date  to  speak  of  countries.  If  the  war  is  to  last  an 
appreciable  time  longer  the  world  shipping  pool  will 
be  a  reality  if  it  is  not  already  one  today.  The  stress 
of  time  will  in  all  likelihood  necessitate  ah  extension 
of  pooling  arrangements  to  every  seafaring  nation. 

The  world's  supply  of  ships  depends  upon  the  two 
forces  of  construction  and  destruction.  The  latter  is 
to  be  understood  to  cover  losses  from  wear  and  tear, 
normal  accidents,  as  well  as  war  losses,  i.  e.  thru  raid- 
ers, mines  and  submarines.  It  should  be  kept  in  mind, 
however,  that  both  wear  and  tear  and  ordinary  marine 
losses  are  indirectly  affected  by  the  war  thru  the 
effects  of  overstrain,  deferred  maintenance,  inexperi- 
enced crews,  removal  of  coast  lights  and  like  causes. 

If,  on  the  other  hand,  we  consider  the  shipping  of 
an  individual  country  additional  items  have  to  be  con- 
sidered, namely  those  which  refer  to  the  mere  shifting 
of  tonnage  from  one  nation  to  another :  commandeer- 
ing and  purchasing  in  the  case  of  friendly  nations,  and 
seizure  and  capture  when  the  transfer  is  between  hos- 
tile countries. 

Of  course,  the  mere  quantity  of  available  tonnage 
does  not  represent  a  true  measure  of  the  carrying  ca- 
pacity of  that  tonnage.  That,  again,  is  influenced  by 
such  factors  as  a  more  liberal  interpretation  of  lading 
regulations,  abandonment  of  long  distance  trading. 


SHIPPING  PROBLEMS  IN  WAR  TIME       351 

avoidance  of  all  unnecessary  duplications  of  serv- 
ices, etc. 

For  several  reasons  it  is  extremely  difficult  to  ascer- 
tain the  exact  effect  of  all  these  forces  upon  the  status 
of  shipping  in  war  time.  Much  information  which  in 
ordinary  time  is  willingly  divulged  is  kept  secret  lest 
the  enemy  profit  by  it.  Furthermore  a  comparison  of 
statistical  data  of  various  nations  regarding  shipping 
is  rendered  difficult  by  the  promiscuous  use  of  various 
units  of  measure  without  any  indication  which  meas- 
ure is  meant.  We  refer  here  to  the  use  of  the  gross, 
net  and  deadweight  tons,  the  meaning  of  which  was 
explained  on  page  206. 

10.  World's  tonnage  in  1914- — A  study  of  the 
changes  in  the  world's  shipping  must  begin  with  the 
number  and  capacity  of  ships  in  1915.  In  an  earlier 
chapter  the  number  and  tonnage  of  ships  for  the  prin- 
cipal maritime  countries  have  been  given.  Many  of 
the  current  references  are  to  deadweight  capacity 
which  may  be  estimated  at  1%  of  the  gross  tonnage. 
Dividing  the  nations  of  the  earth  into  groups  accord- 
ing to  their  relation  to  the  world  conflict,  the  tonnage 
of  1914  as  reported  by  Lloyd's  Shipping  Register 
was: 

Deadweight  tons, 
Group  Gross  tons  estimated 

Allies 28,324,000  47,205,000 

United  States .  .      5,368,000  8,945,000 

Central  Powers.     6,648,000  11,080,000 

Neutrals 8,748,000  14,580,000 


49,090,000  81,810,000 

XV — 24 


352  SHIPPING 

11.  Changes  wrought  hy  war. — Losses  to  the 
world's  shipping  thru  the  activity  of  submarines  can- 
not be  stated  with  absolute  accuracy,  but  from  avail- 
able data  a  close  approximation  can  be  made.  We 
know  the  amount  of  British  losses  in  tons  to  Decem- 
ber, 1916,  but  after  that  date  must  estimate  the  ton- 
nage from,  the  number  of  ships  sunk.  To  the  losses 
so  estimated  for  Great  Britain  and  other  countries, 
must  be  added  losses  from  raiders,  from  mines,  not 
fully  successful  submarine  attacks — damaging  and 
beaching — from  ordinary  maritime  disaster  and 
finally  from  wear  and  tear.  To  offset  these  losses  the 
gains  thru  new  construction  are  to  be  considered. 

To  acquaint  the  reader  with  the  sources  of  the  in- 
formation and  the  processes  by  which  conclusions  are 
drawn  from  them  would  lead  him  thru  a  maze  of  fig- 
ures. The  results  of  a  careful  inspection  and  weigh- 
ing of  the  various  sources  of  information  are  shown  in 
the  following  statement : 

WORLD  SHIPPING  IN  THE  GREAT  WAR 

Gross         Deadweight 
Tonnage  Tonnage 

I.     World's  Shipping,  at  Outbreak  of  the  War 49,090,000     81,815,000 

II.     Deductions,  August  1,  1914,  to  December  31,  1917 

A.  Tonnage  withdrawn  from  world  commerce 

1.  German  and  Austrian  tonnage 

German 5,450,000 

Austrian 1,056,000     6,515,000 

2.  Russian    and    Allied   tonnage 

tied   up   in   the   Baltic   and 

Blacli  Seas 1,000,000 

3.  Allied  tonnage  held  m  enemy 

ports  and  ports  occupied  by 

the  enemy 500,000 


SHIPPING  PROBLEMS  IN  WAR  TIME       353 

Gross         Deadweight 
Tonnage         Tonnage 

B.  Tonnage  destroyed  by  submarines 

or  mines 

1.  British 

1914-15 1,225,000 

1916    1,136,000 

1917    4,351,000     6,712,000 

2.  Other  Allies 

1914-15 186,000 

1916    272,000 

1917    1,870,000     2,328,000 

3.  Neutrals 

1914-15   327,000 

1916    663,000 

1917    1,700,000     2,690,000 

C.  Tonnage  lost  thru  raid- 

ers, wear  and  tear, 
ordinary  marine  dis- 
asters, etc. 

1914-15 900,000 

1916    500,000 

1917    800,000     2,200,000 

Total  Deductions    21,945,000     86,575,000 

III.  Tonnage  Remaining 27,145,000     45,240,000 

IV.  Additions,  August  1,  1914,  to  December  31,  1917 

A.  Construction 

1.  British 

1914-15 1,103,000 

1916    582,000 

1917    1,164,000     2,849,000 

2.  United  States 

1914-15 400,000 

1916    550,000 

1917    901,000      1,851,000 

3.  Others 

1914-15 733,000 

1916    818,000 

1917    856,000     2,407,000 

B.  Capture  and  Seizure  of 

Enemy  Vessels 

Great  Britain 600,000 

United  States 600,000 

Chile    320,000 

Brazil     250,000 

Portugal     250,000 

France    200,000 

Italy     150,000 

Cuba 20,000     2,390,000 

Total  Additions 9,497,000     15,830,000 

V.     Tonnage  Available  to  Allies  and  Neutrals  Decem- 
ber  31,    1917 36,642,000     61,070,000 


VI.     Net  Loss  August  1,  1914,  to  December  31,  1917. .  .12,448,000-  20,745,000' 
*25.3%.  ■    ' 


354  SHIPPING 

12.  Shipping  losses. — The  figures  show  a  reduction 
in  round  numbers  of  over  12,000,000  tons  in  the 
world's  available  shipping,  or  roughly  one-fourth  of 
the  total.  This  loss  has  not  fallen  exclusively  upon 
the  AMies  and  neutrals,  but  it  represents  a  consider- 
able diminution  in  the  world's  carrying  capacity.  Of 
course  there  has  been  a  loss  of  trade  in  many  branches, 
but  this  has  probably  been  more  than  offset  by  the  im- 
perative demands  which  the  armies  and  navies  of  the 
Allied  powers  make  upon  the  remaining  tonnage. 
Furthermore  the  increased  demand  for  imported 
foodstuffs  and  fuel  on  the  part  of  such  countries  as 
France  and  Italy  intensifies  the  strain  on  the  charter 
market.  Add  to  this  the  tonnage  space  taken  up  by 
the  American  ammunition  shipments  and  the  needs  of 
the  American  war  machine  itself,  and  the  situation  ap- 
pears in  an  entirely  different  light.  How  big  the 
needs  are,  only  those  familiar  with  the  militaiy  secrets 
of  the  Allies  are  able  to  state.  Here  the  war  closes 
the  door  to  the  private  investigator  who  must  confine 
himself  to  the  mere  statement  of  the  problems. 

13.  Meeting  the  losses. — The  loss  of  tonnage  is  be- 
ing fought  not  only  by  increased  and  accelerated 
building  programs,  but  also  by  measures  which  have 
to  do  with  the  operation  of  the  existing  tonnage. 
There  are  two  ways  which  deserve  special  attention 
because  of  their  far-reaching  effects — effects  which 
will  be  as  keenly  felt  after  the  war  is  over  as  they  are 
being  felt  now.  We  refer  in  the  first  place  to  the 
shifting  of  the  trade  routes.    In  order  to  increase  the 


SHIPPING  PROBLEMS  IN  WAR  TIME       355 

efficacy  of  the  available  tonnage  a  large  amount  of 
the  distant  trading  has  been  sacrificed.  Such  regions 
as  Australasia,  the  Dutch  East  Indies  and  even  im- 
portant sections  of  South  America  have  been  stripped 
of  the  tonnage  which  used  to  serve  them  in  peaceful 
times.  As  Lord  Robert  Cecil  said:  "Many  trades 
built  up  in  distant  waters  and  sustained  by  British  in- 
dustries have  been  abandoned  to  neutrals,  and  even 
British  coastal  traffic  is  being  subjected  to  a  searching 
review  to  withdraw  all  vessels  which  can  be  utilized  for 
ocean-going  work."  As  far  as  could  be  done  without 
sacrificing  absolutely  necessary  trade  connections,  all 
shipping  has  been  concentrated  in  the  North  Atlantic 
service,  the  trade  with  the  West  Indies  and  the  trade 
between  the  Allies.  The  result  is  that  huge  masses  of 
valuable  supplies  such  as  sugar  in  Java,  wool  and 
wheat  in  Australia  cannot  be  moved.  Such  a  shifting 
of  the  shipping  of  the  world  involves  a  great  disloca- 
tion of  trade. 

Closely  connected  with  this  is  the  drastic  reduction 
of  all  imports  not  utterly  indispensable  for  the  sus- 
tenance of  the  population  and  the  vigorous  prosecu- 
tion of  the  war.  In  an  interview  last  September  Lord 
Robert  Cecil  stated  that  British  imports  were  reduced 
from  58,000,000  tons  before  the  war  to  43,000,000  in 
1916  and  to  a  figure  still  considerably  lower  in  1917. 
British  exports  experienced  a  reduction  of  26%  in  2% 
years  of  war.  That  is  to  say  exports  to  the  Allies  in- 
creased slightly  while  shipments  to  the  oversea  domin- 
ions and  to  foreign  countries  fell  off  nearly  one- third. 


356  SHIPPING 

What  the  year  1918  will  bring  to  the  navigating 
world  cannot  be  foretold.  The  outcome  will  depend 
largely  upon  the  achievements  of  American  shipyards. 
If  the  accomplishment  should  be  as  great  as  are  the 
plans  all  will  be  well.    But  haste  is  imperative. 


REVIEW 

Explain  the  need  for  ships  in  the  conduct  of  the  war. 

Describe  the  operations  of  the  United  States  Shipping  Board. 

What  problems  of  ship  construction  must  be  met  in  the  ship- 
building program  on  which  the  United  States  has  entered? 

What  will  be  the  operating  needs  of  the  new  ships? 

What  war  losses  has  shipping  of  the  world  sustained  since 
1914? 


INDEX 


Agents, 

Commission,  89-91;  Forwarding, 
91-92;  Fereign,  102-03;  Manu- 
facturers', 107;  Del  Credere, 
90;  And  early  merchants,  96; 
In  export  trade,  137. 
American  Exporters, 

European   war,    113—14;   Of  copper, 

114 
.SV?    Foreign   Trade,    Cooperation    in 
American  International  Terminal  Cor- 
poration,   307-08 
Americas,    The.      See   Banks 
Anti-Trust  Laws, 

Objections     to,     127 ;     And     foreign 
trade,   129-130 
Argentine,  Grain  Exports,  269—70 
Australia, 

Marking  goods  for,  154;  Common- 
■wealth  Commerce  Act,  154—55 ; 
Invoices,  156;  "Non-dumping" 
certificates,    176 


Balance  of  Trade,  Favorable,  7—8 

Banks, 

Means     of     trade     promotion,      71; 
Branches,      76-78;      Federal     Re- 
serve,   77 ;    Foreign    branches    of 
Canadian  banks,  80 
See  Foreign  Trade 

Berth   Cargo,   244-45 

Bethlehem  Steel  Corporation, 
See   Iron   Ore 

Bill   of  Lading, 

Foreign,  159-60;  Railroad,  160-61; 
Canada,  162;  "London  Clause 
Charge,"  163;  Export  declara- 
tion, 167—68;  Poraerene  Act, 
169;  When  obtainable,  169-70; 
Consignee,  170;  Negotiability, 
170-71;  "Foul  or  clean,"  171; 
"Letter  of  indemnity,"  171; 
Railroad  and  ocean,   253 

Bill  of   Lading  Act,    162 

Board   of   Trade,    See   Trade   Informa- 
tion 

Boas,    H.    A.,    272 

Bond,    Goods   in,    168-69 


Boyd,  William,  ^2-03 

Brazil,   Consular  Invoice  for,  173-76 

Britain,  Great, 

Ship  measurement,  209-10;  Load 
line,  210;  Freight  rates,  260; 
Coal  exports,  268—69 ;  Raw  ma- 
terials,  304-05;    Subsidies,  319 

British  Board  of  Trade,  258 

British  Royal  Commission  on  Shipping 
Rings,   291 

British  Sales  of  Goods  Act,   136-37 

"British  Shipping,"    260 

Brussels  Convention,  See  Sugar 

Bureau, 

Of  Navigation,  63 

See   Trade  Information 

Business,   American,   See   Foreign  Pol- 
icy of  the  United  States 

"Business  and  the  Government,"  See 
Trade  Information 


Canada, 

Foreign  trade  and,  79-80;  Rail- 
ways, 97,  310;  Exporting  meth- 
ods, 108-09 ;  Commission  houses, 
109 ;  Canadian  Customs  Act, 
169n;  Sail  vs.  steam,  219n; 
Coasting  trade,  220;  Privately 
owned  lines,  237n;  Ocean  freight 
rates,  258n;  Ship  combinations, 
292-93;  Drayton,  Sir  Harry,  293; 
Investigation  Commission,  293; 
Proposed  freeport,  307n;  Ports, 
309;  Montreal,  310-13;  Pacific 
ports,  313;  St.  Johns  and  Hali- 
fax, 313 

Canadian  Shipping, 

Present  status,  331;  Lake  fleet, 
331-32;  Tonnage,  332;  Growth, 
332;  Coasting  trade,  333;  Dry- 
docks,  334;  Pacific,  335;  Govern- 
ment aid,  335—36 ;  Restrictions, 
336-37;    Export   Association,    338 

Canadian    Shipping    Act,    See    Govern- 
ment 

Canadian  Trade, 

Former    isolation,     20;     Commercial 


357 


358 


INDEX 


Canadian    Trade — continued 

policy,  21-22;  Character,  22-23; 
Early  stage,  23—24;  Reversal  in 
balance,  24—25 ;  Creditor  nation, 
25—26;  Increased  production 
needed,  26—27 ;  Raw  materials 
and  food  stuffs,  27—30;  Manufac- 
turing, 20—31;  Competition,  31— 
32;  Promotion  of,  32-34 
See   Foreign    Trade 

Canadian     Trade     Commissions,     See 
Canada 

Cargo, 

Tramp,  228-29;  Cost  of  carrying, 
229;  Mixed,  229;  Lots,  244; 
Berth,  245;   Rate-making,  271-72 

Cargo  Ton,  Weight  and  Measurement, 
209 

Carriers,  Ocean, 

Development,  217;  Restrictions  on 
certain  routes,  217—18;  Reasons 
for  growth  in  size,  218—19;  Coal 
combustion,  219;  Engine  develop- 
ment, 219;  Steam  vs.  sail,  219- 
20;  Diesel  engines,  221-22;  Oil 
burners,  221;  Wooden,  replaced 
by  iron  and  steel,  223;  Classifi- 
cation by  service,  224;  Tramps 
distinguished  from  liners,  224- 
25;  Commission  on  Shipping 
Rings,  225-26 
See  Liners,   Tramp  Steamers 

Carriers,    Private, 

Merchant,  232—33;  Changes  in  type, 
233-34;  Chartering,  234;  Renais- 
sance, 234;  Corporation  owned, 
235;  Examples,  235-36;  United 
States  Steel  Corporation,  235-36  ; 
United  Fruit,  236-37;  Canada, 
237n;  Merchants',  238-39;  Oil 
trade,  238-39;  Pacific  Mail,  239; 
Pacific  Ocean,  239—40;  Railroad- 
steamship  lines,  239—40 

Carriers,  Public,  Development  of,  233- 
34 

Cash  Discounts,  137-38 

Certificates, 

Custom  House,  167-68;  Of  Origin, 
176;    "Non-dumping,"   176 

Chamber  of  Commerce,  United  States, 
204-05,   347-49 

Chartering, 

Reasons  for,  234;  Continental, 
markets,  246-47 ;  Great  Britain, 
247;  Typical  operation,  247-49; 
Smith,  R.  J.,  248-49;  Ports  of 
destination,  249;  U.  K.  H.  H. 
range,  250;  Negotiations,  250—51; 
Exchanges,  250;  Parties,  251-52; 


Chartering — continued 

Ship-brokers,  251 ;  Trip  and  time, 
251;  Rates,  257;  Fluctuations, 
262;  Marginal  rate,  263;  New 
York  and  other  Atlantic  ports, 
251-52;  Clapp,  E.  J.,  303 

China,   Coal  fields,   40 

See  International  Trade,  World 
Trade 

Civil  War,  American  Merchant  Marine, 
317 

Clapp,  E.  J.,  294,  301,  326 

Clayton  Law,   129 

Clearance   Papers,    212-14 

Coal, 

Consumption,  and  high  speed,  237 ; 
British  exports,  268-69;  United 
States  exports,  269-70 

Coal  Trade, 

China,  40;  International,  41;  Eng- 
lish, 42 ;  German,  43 ;  Future  of, 
44 

Coastwise   Shipping, 

Canada,  220,  333;  United  States, 
221,    314-15 

Coffee, 

Soil  exhaustion,  58 ;  Importation, 
59;  Valorization,  59 

Combinations,   Ship, 

Tramps,  276-80;  Sailing  Ship  Own- 
ers, 279;  Baltic  and  White  Sea 
Conference,  280;  Liners,  280; 
Steamship  agreements,  282 ;  Im- 
portance, in  U.  S.,  283 ;  South 
American  trade,  283—84;  Con- 
ferences and  pools,  284—85;  Ship- 
ping investigation,  289;  Monopo- 
listic nature,  289;  Shippers'  ob- 
jections to,  290-91;  Deferred  re- 
bates, 290;  Canada,  292-93 

Commerce, 

Philadelphia  Commercial  Museum, 
69 

Commission  House, 

Position,  97-98;  Definition,  98;  As 
Merchant,  98-99;  Advantages, 
99-101;  And  Exporting  manu- 
facturers, 101-02;  And  Foreign 
agents,  102-03;  Field,  103-04; 
Services,  105;  Limitations,  105; 
Canada,  109 

Commission  on  Shipping  Eings,  Royal, 
225-26 

Commonwealth  Commerce  Act,  154 

Competition, 

Freight  rates,  265,  273-74;  Frank- 
lin, P.  A.,  277;  Regulated  vs. 
wild,  277;  Hardy,  Rufus,  277; 
Government  investigation,  277-78 


INDEX 


Conferences,    Steamship, 

Advantages,  286-89;  Huebner,  S.  S., 
286-87  ;  Rate  wars.  287-88  ;  Com- 
petition, 287-89;  Economies,  288; 
British    Royal    Commission,    291; 
New  lines,  291-92 
See  Combinations,  Ship 
Consular  Invoices,    172-76 
Cotton, 

Spinning      industry,      54;      World's 
consumption,    54 ;    Growth    of   ex- 
port trade  in,  55 
Creditor  Nation,  A,  Becoming,  8 

See    Canadian  Trade 
Cubical  Capacity,   Of  Vessels,   207-08 
Custom  House, 

Making     shipments     thru,      164     et 
seq. ;  Export  declaration,  167—68  ; 
Manifest,    215 
Customers,  Foreign, 

Getting     order,     135;     Samples     to, 
135-37;    Cash   discounts,    137-38 


Dead  Weight  Tonnage,  205-06,   210- 
11 

Declaration  of  London,  200 

Delivery,    and    prices,    138 

Diesel    Engine,    221-22 

Differences, 

Racial,  37;  Climatic,  37-38;  Elimi- 
nated, 38;  Stage  of  economic  de- 
velopment, 38;  Natural  resources, 
39 

Displacement  tonnage,   205 

Discounts,    Cash,    See    Cash   Discounts 

Dollar,   Captain  Robert,  210 

"Dumping,  Non-,"  Certificates  of,  176 


ISconomic    and    Development    Commis- 
sion,  See   Foreign   Trade 

Emergency  Act,  325 

Engine, 

Development  of  ship,  219;  Diesel, 
221-22;   Oil-burning,  221-22 

England,    "Splendid   Isolation"    of,    4 

Entrepot,   See  Transshipment 

European  War, 

Commercial  interdependence,  4; 
Foreign  trade,  5 ;  Tax  burden  in 
Canada,  12 ;  Small  manufacturers, 
116—17;  Need  for  cooperation 
after,  122 ;  Commerce  and  indus- 
try, 122;  Competition  after,  133; 
Freight  rates,  260,  274-75;  Amer- 
ican Merchant  Marine,  320—21 

Export    Association    of    Canada,    See 
Export  Trade 


Export   Trade, 

Protects  domestic,  13 ;  Federal  Re- 
serve Act,  15;  Webb  Bill,  16; 
Pan-American  Conference,  17 ; 
Vanderlip,  F.  A.,  18-19;  Canada 
and  U.  S.,  20;  United  Kingdom, 
23;  Increase,  24;  Food  stuffs  and 
raw  materials,  27;  Forces  pro 
and  con,  30;  Branch  factories, 
32;  Associations  formed  for,  33; 
Ottawa,  33 ;   Cotton,   55 

Export   Trade,    Technic    of. 

Indents,  135,  149-50;  Receipt  of 
order,  135,  150-51;  Samples, 
135-37;  Price  policy,  137; 
Agents,  137;  Cash  discounts,  137— 
38;  Price  quotations,  137  et  seq.; 
Typical  sales  contract,  141  et 
seq. ;  Packing  goods,  152—53 ; 
Marking  goods,  154-55;  Weights 
and  measures,  154;  Invoicing, 
155—57;  Statement  of  charges, 
157;  Certificates,  158,  176;  Bill 
of  lading,  159-60;  Inland  trans- 
portation, 159;  Canada,  162-63; 
"London  Clause  Charge,"  162; 
Shipments,  163—65;  Necessary 
documents,  164—66;  Custom 
Houses,  165-66 ;  Export  declara- 
tion, 167-68;  Steamship  bill  of 
lading,  169  et  seq. ;  Consular  in- 
voices, 172-73;  Federal  Trade 
Commission,  172 ;  South  America, 
172;  Australia,  176;  War  re- 
strictions,   194—95 

Exporting  Methods, 

Foreign  trade,  84;  Direct  and  in- 
direct, 85 ;  Marketing,  87  ;  Sales- 
men, 88—89;  Commission  agents, 
89-91;  Freight  brokers,  92;  Par- 
cel post,  92-94;  Middleman,  95- 
96;  Commission  house,  97  et  seq.; 
Merchant  system,  105-07;  Can- 
ada,   108-09 

Exports, 

European  war,  5,  7—8;  Manufac- 
tured goods,  5—7 ;  Raw  materials, 
5,  9-10;  NVheat,  5,  10;  Four 
steps  in  evolution,  6 ;  Creditor 
nation,  8 ;  Reason  for  stimulation, 
8-9 ;  Approximate  tonnage,  242— 
43 

Exports  of  United  States,  in  war  times, 
See  War 

Express  Companies,  See  Foreign  Trade 


Far  East,  See  Commission  Houses 

Farrell,  J.  J.,  66-67 

Federal  Reserve  Act,   15,   88-92,  304 


360 


INDEX 


Federal    Trade    Commission,    111-13, 
116-17,    172 

Franklin,  P.  A.,   278 

Free  Trade,  See  International  Trade 

Foreign  Policy  of  the  United  States, 
Washington,  George,  3 ;  Monroe 
Doctrine,  3;  Isolation,  4—5;  Eco- 
nomic basis,  4 ;  European  War, 
4;  Growth,  4;  International  in- 
terdependence, 4 

Foreign  Trade, 

Individual  venture,  4;  Limits,  4 
Need  for  policy,  11;  Industries 
12;  Farrell,  J.  J.,  13;  Internal 
power,  13;  Underwood,  Oscar  W. 
13—14;  Ideal  opportunity,  14-16 
Aid  to  expansion,  16—17 ;  Need  of 
science,  17—19;  Panama  Canal, 
15;  Canada,  22—23;  Raw  material 
22  ;  Manufactures,  22  ;  Extension 
33-34;  Training  for,  66-67;  Kies 
W.  S.,  67;  National  City  Bank 
67;  Canada,  68;  Express  com 
panies,  70-71;  Banks,  71-73 
Bureau,  73-75;  Railroads,  82 

Foreign  Trade,  Cooperation  in, 

Need  of,  110-11;  European  meth 
ods,  111-13;  European  War,  113 
122;  American  copper,  114;  Ger 
man,  114—17;  Advantages,  116- 
17;  Forms,  119;  Cartels  and  syn 
dicates,  119-21;  Policies,  121-22 
Organization,  127 ;  Legislation 
needed,  128;  Exemption,  128-29 
Clayton  Law,  129-30;  Federal 
Trade  Commission,  130—31;  Can- 
ada, 132-33 

Foreign  Trade,  Elements  of. 

World  trade,  36;  International,  37; 
Development,  37—39;  Natural  re- 
sources, 39—40;  Coal,  41  et  seq.; 
German,  43 ;  British,  43 ;  Grain, 
45-47;  Sugar,  56-57;  Coffee,  58- 
59;    Rubber,   60-61 

Foreign  Trade  of  United  States, 

Necessity,  5  ;  European  War,  5,  7—8  ; 
Increased  exports,  5 ;  Manufac- 
tured goods,  5—6,  9—10 ;  Favorable 
balance,  7-8;  Statistics,  240;  New 
York,   297-99 

Forests,  See  Trade  Policy 

France,    Subsidies   to   Sailing   Vessels, 
279-80 

Freedom  of  the  Seas, 

Recognition,  199—200;  International 
law,  199-200;  Grey,  Sir  Edward, 
200-01;  Hague  Conference,  200- 
01 ;  Economic  law  and,  201 ;  Boyd, 
William,  202-03 ;  Guarantees, 
204-05 


Free  Ports, 

Hamburg,  305;  Hongkong,  305; 
Proposed  in  U.  S.  and  Canada, 
306 

Freight,  Low  grade,  carried  by  tramp, 
228 

Freighter,  See  Liners,  Tramp  Steamers 

Freight  Broker,   See   Exporting  Meth- 
ods 

Freight  Charges,   and  Kinds  of  Tons, 
209 

Freight  Bates,  Ocean, 

Growth  in  size  of  tonnage,  242—43; 
Charter  and  liner,  257,  262-64; 
vs.  Land  rates,  257 ;  Reasons  for 
low,  258;  Canada,  258n;  British 
Board  of  Trade,  259;  Fluctua- 
tions, 259-62 ;  British,  inward 
and  outward,  260;  European 
War,  260,  274-75;  "British 
Shipping,"  261;  Marginal,  263; 
Cost,  of  operation,  264;  Competi- 
tion, 265-67;  Knot  time,  265, 
273;  Sherman,  L.  K.,  265,  271- 
72;  Johnson,  E.  R.,  265-66; 
Schwerin,  R.  P.,  266;  Pacific 
ocean,  267 ;  Standards  of  Japan, 
267;  Load  factors,  268;  U.  S. 
and  British  coal  exports,  268— 
70;  Argentine  grain,  269-70; 
Triangular  voyages,  270-71; 
Mixed  cargoes,  271;  IJoas,  H.  A., 
272;  Effect  of  tramps,  273-74; 
Quotations,  273-74;  Huebner, 
S.  S.,  274;  Conferences,  286-88; 
Rate  wars,  287-88;  Shipping 
Board,  336 

Freight   Service,   Ocean,   242 

Freight   Traffic, 

United  States,  244 ;  Cargo  lots,  244- 
45;  Evolution,  244-45;  Bertk 
cargo,  245;  Liner,  246,  252-53; 
Charter  market,  246-47;  Con- 
tinental ports,  247—48 ;  Great 
Britain,  247  ;  Forwarders  and  sea- 
board brokers,  253;  Steamship 
agents,  254;  Transshipment,  254— 
56 
See    Charter  Business,    Liners 


German  Cartels,  119-22 
Germany, 

Bismarck's     view     of     colonies,     4; 
Raw  materials  exported,   10 
Goods, 

Packing,  152-53;  Marking,  154-55; 
Commonwealth  Commerce  Act, 
154;  Weights  and  measures,  154; 
Payment,    157—58;    Inland    trans- 


INDEX 


361 


Goods — continued 

portation,  159 ;  Bill  of  lading,  160 
et  seq. ;  Making  shipment,  164— 
65 ;  Custom  House,  165-66 ;  In 
Bond,   168-69 

Government, 

And  Trade,  62;  Taxes,  62;  Ship- 
ping, 63 ;  Canadian  Shipping  Act, 
65  ;  Consular  reports,  67  ;  British, 
aid,  68—70;  Department  of  Trade 
and  Commerce,  70;  German  serv- 
ice, 70;  Prussian  and  German 
potash,  114;  Control  in  war  times, 
193-94;  Investigations,  277;  U. 
S.  and  Great  Britain,  277-78 
See  V/ar,  Effects  on  Foreign  Trade, 
and  Shipping  Problems  in  War 
Times 

Grains, 

Cargoes,'  and  New  York,  301 ;  Balti- 
more and  Philadelphia,  301-02; 
"Railway  Traffic,"   302 

Grey,  Sir  Edward,  200-01 


Hague   Conference,    200-01 
Hardy,  Rufus,  277 
Hongkong,   a  Preeport,    307 
Huebner,  S.  S.,  274,  286-87 


Immigration  Traffic,  286 

Imports,    Approximate    Tonnage,    242— 
43 

Imports    of   United    States,    influenced 
by   war,    186-90 

Indent,  The, 

Reason  for,  135;  Contents,  149-50; 
Open  or  closed,  149;  Course,  150; 
Copies,  150;  Order,  150-51; 
Form,   151 

Indirect  Exporting,  91-95 

Industries  and  Foreign  Trade,   12 

International  High  Commission,  154 

International  Mercantile  Marine,   278, 
329-30 

International  Trade, 

Causes,  37 ;  Transportation,  37 ; 
Free  Trade,  39;  Coal,  41  et  seq.: 
Iron  ore,  44;  Grains,  45—51; 
Banana,  52 ;  Potato,  52 ;  Cotton, 
53-55;  Tobacco,  56-57;  Sugar, 
57;    Rubber,    60-61 

Investments, 

Foreign,  79-80;  British,  80;  Cana- 
da's foreign,  81;  Canadian  rail- 
ways,   82 

Invoices, 

Low,  155;  Export  differs  from  do- 
mestic, 156-57;  Consular,  172-73 


Iron  Ore, 

And      Industrial      civilization,      44; 
Bethlehem  Steel,  44 


Japan,   Freight  Rates,   267 
Johnson,  Emory  R.,  265-66,   296 


Kies,  W.  S.,  67,  125,  306 
Knot   Time,   265 


Labels  for  Goods,  154-55 

Land  Transportation,  and  Ocean,  203- 
204 

Law,  International,  199  et  seq. 

Liners, 

Freight  rate  policy,  211;  Distin- 
guished from  tramps,  224-25; 
Advantages  of,  229 ;  Corporation 
owned,  235-38;  Rates,  257,  263; 
Effect  of  tramps,  273 ;  Combina- 
tions, 280—81;  Rate  cutting  and 
rate  wars,  281 

Liner  Trafac, 

Intricacy,  252 ;  Large  shippers, 
252;  Rate  sheets,  252;  Contracts, 
253 

Lloyd's,  212,  251 

Load  Factors,  267-68 

Load  Line,  210-11 

Loans, 

Canada  and  Great  Britain,  23; 
United  States,  23 

London,    Transshipment   at,    302 

"London  Clause  Charge,"    162-63 


Manifest,  215 

Manufacturers  and  Manufactures, 
Exports,    5—6,    9,    30;    Competition, 
31;      Opportunity,      31;      Handi- 
capped,       116—18;       Cooperation, 
118-19;  Combination,  129 

Marketing  Policy,  See  Policy 

Martin,    M.   M.,   207 

Measurement   of  Ships,   207   et  seq. 

"Merchandise  Marks,"   154 

Merchant, 

Agents,  96-97;  System,  105-07; 
Export,  105;  German,  106;  Brit- 
ish,  107 

Merchant  Carriers,  232-33 

Merchant   Marine,   American 

Coastwise,  316—317;  Present  status, 
316;  Importance,  317;  Begin' 
nings,  317;  Later  development 
318-19;  War  of  1812,  318;  Brit 
ish    subsidies,     319;     Civil    War, 


362 


INDEX 


Merdiant  Marine — continued 

319;    Recent   tendencies,    320-21 
Compared  to  foreign,  318—19;  De 
cline,  320;  New  interest,  322-23 
Steel  industry,  322 ;  Adverse  con 
ditions,    323;    Congress,    322-23 
European   War,    323—24;    Panama 
Canal  Act,    324;    Emergency  Act, 
325;     Ship    Purchase    Bill,    326- 
27;      War     Risk      Bureau,      325; 
Clapp,  E.  J.,  326 ;   Seamen's  Law, 
327 ;  Dollar,  Captain  Robert,  328- 
29;   Loss   of   Pacific,   328;    Pacific 
Mail  Co.,  329  ;  International  Mer- 
cantile    Marine     Company,     329- 
30;    British  restrictions,    330 

Metric  System,  209 

Middleman, 

Position,    95-96;    Elimination,     103 

Monroe    Doctrine,    1 

Montreal,  Importance  of,  309—11 

Moorsom  System,   207-08 

National  City  Bank,  67,  72 

Natural  Resources, 

Differences  in,  39-40;  China  and 
coal,  40;  Development,  40—41; 
Effect  on  world  trade,  40—41 

New  York  City, 

Value  as  a  port,  297—98;  Predomi- 
nance, 298-99;  Hinterland,  299- 
300;  Railroad  facilities,  300-01; 
Steamship  lines,  301;  Transship- 
ment trade,  303-04;  Federal  Re- 
serve Act,  304;  Decentralization 
of  industries,   307 

Ocean  Carriers,  See  Carriers,  Ocean 

Ocean    Transportation, 

Freedom  of  the  seas,  199  et  seq.; 
Differs  from  land,  203-04;  Capi- 
tal  outlay   for,    204 

Oil-burning  Vessels,   221-22 

Order,  The,   151 

Organizations, 

Legal  status,  127;  Sherman  Act, 
127;  Need  of  legislation,  128; 
Compulsory,  129 

Ottawa,  See  Export  Trade 

Pacific  Mail  Steamship  Line, 

Oil-burners,    222;    Merchants'    line, 
239;    Panama    Canal,    241;    Pur- 
chase of,  328 
Pacific  Marine  Review,  210 
Pacific  Ocean, 

Railroad-steamship  lines,  239—40; 
Freight  rates,  267 


Packing  Goods, 

Climatic  conditions,  152;  Economy, 
152—53;  Regard  for  prejudice, 
153;  Kind  and  color  of  package, 
154 

Panama  Canal,  Aid  to  Foreign  Trade, 
15 

Panama  Canal  Act,  322 

Pan-American  Conference,  See  Export 
Trade 

Panics,  Domestic,   13 

See  Export  Trade,  Foreign  Trade 

Petroleum,  Private  lines  for,  238 

Plimsoll  Line,  211 

Policy, 

Free  trade,  39 ;  Rheinish-Westpha- 
lian  Coal  Syndicate,  43 ;  Market- 
ing, 87;  German  export,  121; 
Control    of   cartels,    122 

Pools, 

Conferences  and,  284;  Administra- 
tion, 285-86;  Definition,  286; 
Kinds  of  trades,  285-86;  Fair- 
ness, 286;    Immigrant  traffic,  286 

Pomerene  Act,    169 

Ports, 

Clapp,  E.  J.,  294-301;  Nature  and 
functions  of  a,  294;  Four  classes, 
296;  Johnson,  E.  R.,  296;  Value, 
296;  Sea  and  River,  297;  Ham- 
burg, London  and  New  York,  297— 
98;  New  York,  297  et  seq.;  At- 
lantic, 301;  Baltimore  and  Phila- 
delphia, 302;  Freeports,  304-06; 
Canada,  310 

Post,  Parcel,   92-94 

Prices, 

According  to  delivery.  138  et  seq.; 
Cash  discounts,  137—38;  Policy 
of,  137-38;  Quotations,  138-39; 
Typical  sales  contract,  141  et 
seq. ;  Effect  of  war  prices  on  trade 
statistics,   190-92 

Promotion  of  Trade, 

Americans  abroad,  65 ;  Training 
needed,  66;  And  available,  67; 
Canada,  68 ;  Philadelphia  Com- 
mercial Museum,  69 ;  Trade 
papers,  70;  Express  companies, 
70-71;  Banks,  71,  76;  Federal 
Reserve  Act,  76-78;  Dollar  ex- 
change, 78—79 ;  Foreign  invest- 
ments,  79   et  seq. 

Bailroads, 

Canadian,  96-97,  310-11;  Bill  of 
lading,  160-67;  Transportation 
different  from  sea,  204;  And 
steamship  bill  of  lading,  253;  To 
New   York,    300 


INDEX 


363 


Bailroad-Steamship  Lines, 

Pacific     Ocean,     239—40;     Canadian, 
240;   Foreign,   240;   Development, 
241 
••Railway  Traffic,"  302 
Baleigb,    Sir   Walter,   14 
Bate    Cutting    and    Bate   Wars,    281, 

287-88 
Bates,  See  Freight  Kates 
Baw  Materials, 

Exports,  5,  9-10;   To  Germany,  10; 
British,  304-05 

See   Exports 
Baw  Products  Company  of  Kew  York, 

See  Rubber 
Bebates,  Deferred,  290 
Eeciprocity,  124 
Begistered  Tonnage,  206 
Beports, 

Consular,    64 
Bubber,  60-61 


Sailing    Ship     Owners,     International 

Union  of,  279-80 
Sailing   Vessels, 

Decrease   in   number,   219 ;    Canada, 

219n;  vs.  Steam,  219;    In  United 

States,     220;     Advantages,     221; 

Future,  222-23;  Usefulness,  222; 

French  subsidies,   279-81 
Sale  of  Goods  Act,  British,  136-37 
Sales,  Typical  Contract  of,  141  et  seq. 
Salesmen,  88-90,  102 
Samples, 

Sending,       135-36;       "Collectors," 

136;     Charging    for,     136;     Must 

represent     goods,      136;      British 

Sale  of  Goods  Act,   136-37 
Schwerin,  R.  P.,  264,  271-72 
Seaboard  Brokers,  253-54 
Seamen's  Law,    327-28 
Seas,  Freedom  of  the.  See  Freedom  of 

the  Seas 
Selling  by  Mail,  See  Post,  Parcel 
Sherman,   L.   K.,  265 
Sherman  Anti-Trust  Act,   111 
Ship-Brokers,   251 
Ship  Purchase  Bill,  325-27 
Shipment, 

Routine     of,      163-64;      Docnmenta 

necessary  for,  164-65 
Shippers, 

Objections    to     combinations,     290; 

Deferred  rebates,   284 
Shipping  in  United  States  and  Canada, 

63-65 
Shipping  Bill,  342-44 
Shipping  Board,  344-47 


Ships, 

Measurement,    207    et  seq.;    Inspec- 
tion    and     registration,     211-12; 
Documents,  212;   Clearance,  213- 
14;     Manifest,     215;     Classes     of 
merchant,  229 ;   Construction,  229 
See   Carriers,  Ocean 
"Ship's  Option,"  209 
Smith,  B.  J.,  248-49 
Societies,    Cooperative,  of  Great  Brit- 
ain,  116 
South  American  Trade, 

Regulations,     172 ;     Ship    c«mbina- 

tions,    283-84 
See  Foreign  Trade 
Speed,  Coal  Consumption  for,  227 
Statistical  Abstract  of  United  States, 

See  Trade  Information 
Steamship  Agents,  254 
Steamship   Agreements,   See   Combina- 
tions, Ship 
Steam  Vessels,   vs.   Sailing,  219 
Suez    Canal,    217-18 
Subsidies, 

Sailing     vessels,     279-80;     British, 
317 
Sugar, 

Sources,    56-57;    Brussels    Conven- 
tion,   57-58 
See  International  Trade 
Supercargo,  The,  233 
Sweden,  Marking  Goods  for,  155 

Tariff  Bates,  See  Foreign  Trade,  Co- 
operation  in 

Terminals, 

New  York,  307;  American  Interna- 
tional Terminal  Corporation,  308; 
Kies,  W.  S.,  308 

Tonnage, 

Definition,  205;  Displacement,  and 
deadweight,  205;  Registered,  206; 
Uniformity  of  measurement,  206- 
07;  Martin,  M.  M.,  207;  Moor- 
som  System,  207—08 ;  Cubical  ca- 
pacity, 208;  Net  register,  208; 
Kinds  of  tons,  208-10;  British  vs. 
American  measurements,  209-10; 
Cargo  tons,  209;  Long  and  short 
tons,  209-10;  "Ships'  option," 
209 ;  Metric  system,  209 ;  Com- 
puting net  from  gross,  210;  Dol- 
lar, Captain  Robert,  210;  Dead 
weight  capacity,  210—11;  Pacific 
Marine  Review,  210;  Load  line, 
211;  Plimsoll  Line,  211 

Tons, 

Freight  charges,  208;  Kinds  of,  208 

Traffic,  Ocean,   Growth  of,  242-43 

Trade  Export,  See  Export  Trade 


364 


INDEX 


Trade  Information, 

Relation,  government  to  foreign 
trade,  62 ;  Revenues,  62 ;  Ship- 
ping, 63 ;  Official  publications,  64- 
65 

Trade  Policy, 

Restricts  trade  ■with  U.  S.,  21; 
Commercial  treaties,  21;  United 
Kingdom,  23 ;  Loans,  23 ;  Inter- 
national relations,  25 ;  Resources, 
27;  Production,  27-28;  Forests, 
28;    Mining,    29 

Trade  Promotion,  See  Promotion  of 
Trade 

Trade  Publications,  75 

Tramp  Steamers, 

Differ  from  liners,  224—25 ;  Defi- 
nition, 225;  Operation,  225;  Con- 
struction, 226;  Economy,  226-27; 
Coal  Consumption,  227 ;  Speed, 
227;  Occupation,  227-28;  Car- 
goes, 227 ;  '  'Keeping  to  the 
beat,"  228;  Legal  status,  228-29; 
Transfer,  228-29;  Charter  ports, 
246-47;  Charter  business,  247- 
48;  Effect  on  liner  rates,  273; 
No  lasting  combinations  of,  278— 
79 ;  Examples  of  combinations, 
279-80 

TransportatiOB,  Inland, 

Method  of  handling,  159;  Railroad 
bill  of  lading,  160-61 

Transshipment, 

Reasons  for,  254;  Entrepot,  298-99; 
London,   302 ;   New  York,   303-04 

Treaties,  With  British  West  Indies, 
France  and  Italy,  21 

Triangular  Voyages,  270-71 

Underwood,  Oscar  W.,  13-14 

United  Fruit  Company,  Steamship 
Lines  of  the,  234-37 

United  States, 

Economic  structure  of,  10;  Need  of 
trade  policy,  11  et  seq.;  Free- 
dom of  the  seas,  202;  Chamber 
of  Commerce  of  the,  204-05 ; 
Moorsom  system,  207-08  ;  Foreign 
trade  statistics,  244;  Coal  exports, 
269-70 

United  States,  Foreign  Policy  of  the, 
See  Foreign  Policy  of  the  United 
States 

United  States,  Foreign  Trade, 

New  York,  298  et  seq.;  "Outports," 
300;  Transshipment,  303 

United  States,   Shipping, 

Coastwise,  63,  197;  Plimsoll  Lines, 
211;  Inspection  and  registration, 
211—12;  Clearance  papers,  212— 
14;    Sailing  vessels,   220;    Steam- 


United  States,  Shipping — continued 
ship  agreements,   282;    Ship   com- 
binations,   283 
See  Merchant  Marine,  American. 

United  States   Steel  Corporation,  Pri- 
vate Lines  ©f,  235-37 

Vanderlip,  F.  A.,  18-19 

Vessels,  Measurements  of,  206-08 

War,  Effect  on  America's  Foreign 
Trade, 
Early  stages  of  war,  178-192; 
America's  foreign  trade,  179; 
Exports  since  1914  to  Europe, 
180-83 ;  Other  continents,  183- 
84;  Nature  of  exports,  184-86; 
Imports,  186-90;  Effects  of  high 
prices,  190—92 ;  America  enters 
the  war,  192-95 ;  Government 
control  of  trade,  193-94;  Effects 
on    export    business,    194—95 

War,  Shipping  Problems  in  War 
Times, 
America  at  war,  340;  Demand  for 
ships,  341-42;  Shipping  Board 
operations,  342—44 ;  New  ship- 
yards necessary,  344—45;  Mate- 
rials needed,  345—46 ;  Labor  inad- 
equate, 346-47 ;  Operating  the 
new  ships,  347—48 ;  Government 
or  private  operation,  348—49 ;  The 
world  shipping  problem,  349—51; 
World's  tonnage  in  1914,  351; 
War  changes,  352-54;  Meeting 
the   losses,    354—56 

Washington,  George,  1 

Webb  Bill,    16 

Weights  and  Measures, 

Bureau  of  Standards,  154 ;  Import- 
ance, 154;  International  High 
Commission,  154;  Metric  system, 
154 

Wheat, 

Exports  of,  5,  10;  Canadian  exports, 
47 ;  Intensive  production,  49 ; 
Seasonal  character,  50-51 ;  Ar- 
gentine and  United  States,  51; 
Measurement,  209 
See  International  Trade 

Wooden  Vessels,  Replaced  by  Iron  and 
Steel,   223 

World  Trade, 

Nature  of,  36;  Growth,  37;  Natural 
resources,  39  et  seq.;  Coal,  41; 
Iron  ore,  44 ;  Grain,  45 ;  Sugar, 
56-57;  Coffee,  58-59;  Rubber, 
60-61 

Young    Men's    Christian    AssoclatioB, 

67 


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